Rapid Progress on North Field Expansion

Insight and analysis for the global LNG industry

Editorial: Feature: Feature: Project Spotlight: Technology: China pushes Oil Prices and the Spain’s Energy Woodﬁ bre LNG Taking the gas reforms US LNG Juggernaut Transition modular option RAPID PROGRESS ON NORTH FIELD EXPANSION A string of contracts and tenders has been launched on the North Field expansion project, which is designed to boost Qatar’s LNG production capacity by 33mn metric ton a year to 110mn mt/yr by 2025-26. Apart from the economic benefi ts, the ambitious move seems designed as a statement of confi dence by Doha in its future, in the face of Saudi Arabian-led sanctions. It will also fi nally put the North Field’s giant reserves to the test. UNDER THE PATRONAGE OF H.H. SHEIKH KHALIFA BIN ZAYED AL NAHYAN, PRESIDENT OF THE UNITED ARAB EMIRATES UNDER THE PATRONAGE OF H.H. SHEIKH KHALIFA BIN ZAYED AL NAHYAN, PRESIDENT OF THE UNITED ARAB EMIRATES

TH 24TH WORLD ENERGY CONGRESS 9-12 SEPTEMBER 2019 | ABU DHABI

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6 13 18 FEATURE: FEATURE: FEATURE: Rapid progress on North China pushes gas reforms Oil Prices and the US LNG Field expansion Juggernaut

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Editorial ...... 4 LNG News ...... 34 Recession Impact Global LNG ...... 34 Corporate ...... 45 Supply ...... 38 In Transport ...... 49 Demand ...... 41 Shipping ...... 52 Events and Conferences ...... 32

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LNG CONDENSED | NATURALGASWORLD.COM 3 EDITORIAL

RECESSION IMPACT

he LNG industry looks set for a prolonged period of the northern hemisphere summer, boosting air cooling of price weakness hit by a double whammy of a demand and thus power generation, and then an early and T supply surplus within the LNG market itself and a cold start to the northern hemisphere winter pushing up steadily worsening outlook for the global economy, which heating demand. will impact energy demand more broadly. While forward spreads show a widening differential ECONOMIC HEADWINDS STIFFEN between Asian spot LNG and European hub prices going into the winter, low prices over the summer mean storage levels The LNG market will certainly need some extra-terrestrial are high. In Europe, many countries’ storage facilities are help because the outlook for the world economy, and thus above 90% full well before the end of the injection season. energy demand more broadly, does not look good. Yet supply continues to build with the US Energy Natural gas demand has grown in recent years faster Information Administration reporting a monthly record for than that for either coal or oil, rising by 5.3% in 2018, the provision of feed gas to US LNG plants in July of 6.0bn compared with oil’s 1.5% and coal’s 1.4%, but if the world ft3/d, 7% of total US dry natural gas production. This is economy moves into recession then the demand boost roughly 40mn mt/yr of LNG on an annualised basis. Export from low gas prices will be ever more dependent on taking volumes over the next 12 months should in fact be higher market share from other energy commodities. as more new capacity is brought online. The signs of worsening economic headwinds continue The ramp up in volumes came in the fi rst half from Cameron to grow, whether one looks at the inversion of US Treasury Train 1 in May and Corpus Christi LNG Train 2 in June. Freeport yields, downward revisions to OECD GDP forecasts, weak LNG and Elba Island LNG are expected to start commercial growth in container ship volum es or plummeting Chinese operations in coming months. The US will have six major LNG and Indian auto sales. facilities in operation, consolidating its recently-acquired position Running alongside is the Chinese-US trade war which as the third largest LNG producer in the world. has resulted in the imposition of tit-for-tat tariffs on hundreds of billions of dollars’ worth of goods. Then there ABSORPTION CONSTRAINTS is Brexit. Even if a no-deal exit for the UK is avoided, uncertainty over the fi nal terms of the UK and the EU’s The problem of where to put all this LNG may become future trading relationship have yet to be determined. acute because the ability to absorb it is limited by Business confi dence in Germany, Europe’s largest contractual and infrastructural constraints. economy and the fourth largest in the world, in August A huge amount of US LNG has fl owed into Europe’s sank to its lowest level in nearly seven years. The German typically under-utilised LNG terminals, but that doesn’t economy shrank by 0.1% between April and June and the mean they can continue to import at the same level. country’s central bank has warned it may enter a technical European utilities have take-or-pay contracts for pipeline gas recession – two consecutive quarters of contraction – in which reduces the amount of spot LNG they might take on the third quarter. It can ill afford serious fallout from Brexit. price grounds alone, while gas-in-storage hitting the tank The next wave of LNG projects is heavily dependent top is another fi nite constraint. on continued robust growth in global gas demand. In the The ability to absorb more LNG relies on demand. Cheap short term, in the event that the weather fails to ride to the gas plus the recent rise in carbon prices under the EU rescue and the global economy stalls, gas demand will be Emissions Trading System has certainly given a boost to ever more dependent on energy policies – such as carbon gas-fi red generation in Europe. trading – that provide it with an economic advantage over However, this alone is unlikely to be enough to absorb its fossil fuel rivals. the surplus unless Mother Nature comes to the industry’s

aid in the form of higher temperatures for the remainder — NGW PHOTO: FLICKR.COM/AMANDA GRAHAM

LNG CONDENSED | NATURALGASWORLD.COM 4 CONTRIBUTORS

ROSS MCCRACKEN

Ross McCracken was managing editor of S&P Global’s fl agship analytical newsletter Energy Economist for 13 years. He was formerly Platts crude oil manager EMEA. Ross has written extensively on oil, gas and power markets, with a particular interest in long-term energy forecasts, new technologies and China. He graduated with an MSc from the London School of Economics in 1993.

DR. NEIL ALEXANDER FORD

Dr. Neil Alexander Ford is a freelance consultant, journalist and expert witness on African affairs, specialising in international relations, the energy sector and political risk. Most of his work focuses on Sub-Saharan Africa, but he also writes on other emerging markets.

Neil has a PhD in African international relations from the University of Edinburgh and 20 years of experience as a writer and analyst for magazines, newspapers and websites, including as associate editor of African Business magazine.

MARTIN DANIEL

After graduating from Oxford, Martin Daniel worked in the Economics Unit of the British Coal Corporation and then the Supply, Transport and Markets team at IEA Coal Research. He later founded the publication Global Private Power and worked for FT Energy and then for S&P Global Platts as editor of Power in Asia and International Gas Report. He is currently a freelance energy consultant.

WILLIAM POWELL

William has been reporting and commenting on Europe’s gas markets for 20 years. He started in journalism at PH Energy Analysis (now ICIS Heren) in 1995, shortly before the UK devised the National Balancing Point -- Europe’s fi rst gas hub. His subsequent career has included senior management and editorial positions at FT Energy, Petroleum Economist, Argus Media and Platts, where he latterly edited International Gas Report. His focus has been on regional markets and how they function. William also speaks Russian and has had several literary/ academic translations published.

LNG CONDENSED | NATURALGASWORLD.COM 5 RAPID PROGRESS ON NORTH FIELD EXPANSION

Neil Ford

atar is well known as the world’s biggest LNG producer, but is expected to be Q overtaken by Australia and then the US in the mid-2020s. Australian energy analysts A string of contracts and tenders has EnergyQuest predict that Australia, which shipped been launched on the North Field 75.1mn mt/yr of LNG last year, will exceed Qatar in terms of LNG exports next year with higher expansion project, which is designed to output from both the Ichthys and Prelude projects. boost Qatar’s LNG production capacity The International Energy Agency (IEA) forecasts by 33mn metric ton a year to 110mn mt/ that the US should then take the top spot by 2024, by which point China will have overtaken yr by 2025-26. Apart from the economic Japan as the world’s largest market for LNG. benefi ts, the ambitious move seems The discovery of the giant North Dome fi eld in 1971, the year that Qatar became designed as a statement of confi dence independent, changed the emirate’s role in the by Doha in its future, in the face of Saudi region. The biggest non-associated gas fi eld in the world, it lies off the north-east coast of Arabian-led sanctions. It will also fi nally Qatar and partly in Iranian maritime territory, put the North Field’s giant reserves to where it is known as the South Pars fi eld. Qatargas estimates recoverable reserves on the the test. fi eld at more than 900 trillion ft3. The reserves give Qatar infl uence over global gas markets and regional diplomacy far out of scale with the size of its population of just 2.6mn, of whom just

12% are Qataris. PHOTO: QATARGAS.COM

LNG CONDENSED | NATURALGASWORLD.COM 6 The big players — LNG exports from 2000 (mn mt/yr)

Qatar Australia United States Russia Other

350

300

250

200

150

100

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BP Statistical Review of World Energy

In May, Qatar Petroleum awarded the front-end engineering and design (Feed) contract for the project’s offshore pipelines and topsides facilities, CONTRACTS AND TENDERS which are expected to take twelve months to complete, to McDermott Middle East. It includes The North Field expansion project involves boosting engineering design for eight unmanned wellhead Qatar’s LNG capacity from 77mn mt/yr to 110mn platform topsides, four 38-inch trunk lines and four mt/yr by 2024 and will include the construction of 28-inch intrafi eld lines. four ‘mega’ trains, each with production capacity Also in May, Qatar Petroleum launched a tender of 8mn mt/yr. Qatargas has not yet provided any for the EPC contract to construct three LNG details on how the LNG will be marketed. storage tanks, compressors to recover tank boil-off Two contracts were awarded in April; to gas during storage and jetty boil-off gas during LNG Consolidated Contractors and Teyseer Trading & vessel loading, rundown lines from the LNG trains Contracting Company for early site works; and to to the storage area, plus two or three new berths. McDermott Middle East for eight offshore jackets. Saad Sherida Al-Kaabi, the Minister of State In April, three joint ventures were invited to for Energy Affairs, and the president & CEO submit bids for the engineering, procurement of Qatar Petroleum, said: “Issuing this tender and construction (EPC) contract for the four new package refl ects Qatar Petroleum’s unique trains: Chiyoda Corporation and Technip France; contracting strategy approach for the North Field JGC Corporation and Hyundai Engineering & Expansion Project. Under this strategy, we have Construction Company; and Saipem, McDermott identifi ed the need for multiple EPC packages Middle East and CTCI Corporation. that can match the execution expertise in the In addition to the four trains, the contract EPC contracting community for specifi c scopes includes developing ethane and LPG of work while providing the opportunity for production and fractionation, a helium plant multiple EPC contractors to participate.” Qatar and ancillary infrastructure to support the Petroleum intends to award the EPC contract by processing units. February 2020.

LNG CONDENSED | NATURALGASWORLD.COM 7 South Korea Other 14.4 14

Turkey 2.3

Spain India 2.5 Qatari LNG exports 2018 (mn mt/yr) 10.9 Source: BP Statistical Review of World Energy Pakistan 4.3

Italy 4.6

Japan 9.9 Taiwan 5.0 China 9.3

North Atlantic 16.6

South Atlantic 1.2 Qatari LNG exports MENA (mn mt/yr) 2.5 by basin, 2018 Source: BP Statistical Review of World Energy

Pacific 56.8

In April, Qatar Petroleum also issued an LNG carriers for the project expansion and could ‘invitation to tender’ to qualifi ed shipyards to exceed more than 100 new carriers in total over bid for contracts to construct new LNG carriers the next decade, according to Al-Kaabi. to support the additional capacity. It will cover replacements to the existing Qatari fl eet and MERGED LNG GIANT shipping requirements for LNG from the Golden Pass LNG export project in the US by Ocean LNG, State management of the LNG sector has been which is 70% owned by Qatar Petroleum and simplifi ed since the merger of Qatargas and 30% by ExxonMobil. The tender will include 60 RasGas in January 2018 under the renamed

LNG CONDENSED | NATURALGASWORLD.COM 8 Qatar’s LNG plants

Trains Year Qatar Petroleum Other Company (mn mt/yr) established stake shareholders ExxonMobil (10%), Total (10%), Qatargas 1 3 x 3.3mn 1984 65% Mitsui (7.5%), and Marubeni (7.5%) Train 4: ExxonMobil (30%) Qatargas 2 2 x 7.8mn 2004 70% Train 5: ExxonMobil (18.3%), and Total (16.7%) Qatargas 3 1 x 7.8mn 2005 68.5% ConocoPhillips (30%) and Mitsui (1.5%) Qatargas 4 1 x 7.8mn 2007 70% Royal Dutch Shell (30%) Ras Laffan 1 2 x 3.3mn 1993 70% ExxonMobil (30%) Ras Laffan 2 3 x 4.7mn 2001 70% ExxonMobil (30%) Ras Laffan 3 2 x 7.8mn 2005 70% ExxonMobil (30%)

Source: BP Statistical Review of World Energy

OWNERSHIP OF QATARGAS’ LNG TRAINS

Despite the current slump in spot LNG prices, Doha’s investment plans are a statement “Qatar’s economic and political of confi dence in rising international LNG policies have been heavily aff ected consumption. According to a report by MENA Advisors in April, global LNG production capacity by geopolitical tension in the Gulf.” will rise by more than 60% between 2008 and 2026 to exceed 500mn mt/yr, including Qatar’s expansion. For all this capacity to be fully utilised, demand would need to increase by just over 6% a Qatargas. Qatar Petroleum estimates that the year. The LNG market expanded by 8.3% in 2018 merger will save Qatar QR2bn ($546mn) in annual to 313.8 mn mt/yr, according to the International operating costs. The state has consistently played Group of LNG Importers. a big role in the industry, with Qatar Petroleum Al-Kaabi said: “While some see natural gas as holding a 70% stake in Rasgas and 51% equity in a transition fuel, we believe it is a destination fuel. Qatargas prior to the merger of the country’s two It is the cleanest of all fossil fuels. It is reliable, LNG projects. affordable, and the fuel of the future...China, along The newly-merged company is the biggest with India, will continue to lead Asia as the main LNG producer in the world. The timing of the drivers behind the growth of global LNG demand.” deal was driven by low hydrocarbon prices, but had been discussed for many years. Al-Kaabi QATAR BATTLES SANCTIONS said that the merger should benefi t the foreign shareholders in Qatargas trains, which were all Doha’s economic and political policies have given positions on the board of the new company. been heavily affected by geopolitical tension in The ownership of Qatargas’ various trains is the Gulf. In June 2017, Saudi Arabia, the United given in the table below. Arab Emirates (UAE), Bahrain and Egypt all cut The LNG sector generates about 85% of diplomatic relations with Qatar, and Qatari citizens Qatar’s export earnings, more than 70% of all in the four countries were given two weeks to government revenue and more than 60% of GDP. leave.

LNG CONDENSED | NATURALGASWORLD.COM 9 Qatargas contracts in force in 2018

Buyer Volume Duration Delivery (mn mt/yr) format Chugoku Electric, JERA, Kansai Electric, Osaka Gas, 2 1998/2021 DES Toho Gas, Tohoku Electric, Tokyo Gas JERA 4 1997/2021 DES Qatargas I JERA 1 2012/2021 DES Naturgy Energy Group 0.75 2005/2024 DES Naturgy Energy Group 0.75 2006/2025 FOB Shizuoka Gas 0.2 2016/2021 DES Pakistan State Oil 3.75 2016/2031 DES PetroChina 3.4 2018/2040 DES Riyadh said that Doha had Qatargas II Total 1.85 2009/2034 DES backed Islamic State, Al Qaeda Total 1.5 2009/2034 DES and the Muslim Brotherhood. Total 1.85 2009/2034 DES Kuwait and Oman decided not to join in the sanctions, which CNOOC 2 2011/2035 DES were quickly named a blockade JERA 0.7 2013/2028 DES by the Qatari government, Kansai Electric 0.5 2013/2027 DES which called the Saudi claims PGNiG 1.1 2015/2034 DES “baseless and unfounded”. Qatargas III The sanctions have been PGNiG 0.9 2018/2034 DES maintained over the past PTT 2 2015/2029 DES two years, but appear to RWE Supply & Trading 1.1 2016/2023 DES have brought some genuine Tohoku Electric 0.06-0.09 2016/2030 DES economic benefi ts for Qatar, which has been forced to Centrica 3 2014/2023 DES fi nd domestic replacements Marubeni 1 2011/2031 DES for the imports on which it Qatargas IV PetroChina 3 2011/2036 DES previously relied. For example, the Petronas 1.14 2014/2023 DES cessation of shipping feeder Uniper 1.5 2014/2018 DES services between the Port Endesa 0.74 2005/2025 DES of Jebel Ali in the UAE and RasGas I KOGAS 4.92 1999/2024 FOB Qatar prompted the Qatari government to greatly speed Petronet LNG 5 2004/2028 FOB up the development of its own Edison 4.6 2009/2034 DES port of Hamad in competition RasGas II CPC 3.08 2008/2032 FOB with Jebel Ali. The only road access into Qatar was across EDF Trading 3.4 2007/2027 DES the very short land border Eni 2.05 2007/2027 DES/FOB with Saudi Arabia, which EDF Trading Up to 2 2017/2021 DES supplied a high proportion of KOGAS 2.1 2007/2026 DES its food requirements, but all imports now have to come by Petronet LNG 2.5 2009/2029 FOB either sea or air. Rasgas III CPC 1.5 2013/2032 DES The split between Doha and KOGAS 2 2012/2032 DES its neighbours did not come Petrobangla 2.5 2018/2033 DES out of nothing, but it is Qatar’s gas wealth that has given Doha Petronet LNG 1 2016/2028 FOB the economic confi dence to Source: GIIGNL

LNG CONDENSED | NATURALGASWORLD.COM 10 balanced view since then. Moreover, any military action against Qatar should be deterred by the presence of the biggest US air base in the Middle East at Al Udeid in Qatar, where more than 100 aircraft and 11,000 military personnel are based. The imposition of sanctions on Qatar triggered an immediate rise in European gas prices, but exports were maintained and Qatar even continued shipping LNG to Egypt. The sanctions have largely failed to have the intended impact. International financial confidence in Qatar remains high and Doha raised $12bn last year in its first “What remains an uncertainty is US dollar bond issue since the sanctions were imposed. the capacity of the North Field to sustain the planned expansion of WITHDRAWAL FROM OPEC

production.” Qatar withdrew from Opec in January, with the official explanation that it had decided to focus on gas rather than oil. Al-Kaabi said that the decision was “not political, it was purely a business try to free itself from Saudi Arabia’s regional decision for Qatar’s future strategy towards the influence and to pursue its own foreign policy. energy sector”. However, Reuters quoted him as There has also been rivalry between the royal stating: “We are not saying we are going to get families of Qatar and Abu Dhabi since the out of the oil business, but it is controlled by an Nineteenth Century and it was this rivalry that organization managed by a country.” stopped Qatar becoming the eighth of the Press reports in Qatar suggest that Doha is emirates in the UAE. It has even been rumoured seeking to increase the prominence of the Gas that the Saudi and UAE governments backed a Exporting Countries Forum (GECF), which is coup attempt in Doha in 1996. based in Qatar. However, Doha has indeed supported Islamist Beijing’s decision to increase tariffs on LNG groups in Syria, Libya and other parts of the imports from the US from 10% to 25% on region, in the face of opposition from Saudi June 1, as part of the Sino-US trade war, has Arabia, which wants nothing to threaten the virtually blocked the sale of US LNG into China. regional political and geopolitical status quo. It is This should open up big opportunities for GECF also true that the Muslim Brotherhood has had exporters, in the short term at least, although some influence in Qatar for decades, despite the it will play to the benefit of all non-US LNG fact that it would like to end all Gulf monarchies, exporters. Qatar has been exporting LNG to China including that of Qatar. for ten years. However, Riyadh and its allies also objected to What remains an uncertainty is the capacity of criticism of their governments by Qatari state- the North Field to sustain the planned expansion funded broadcaster Al Jazeera. They have been of production. Qatar’s earlier moratorium on angered by Qatar’s attempts to cultivate good new gas projects on the North Field was based relations with Iran and bring Sunni and Shia Islam on studies which supposedly showed the North together, which is at least partly motivated by Field’s limitations, although the moratorium may Doha’s need to maintain ties with Tehran because equally have had a political motivation related to the two countries share the giant gas field that is Iranian concerns that gas and condensate would the basis of Qatar’s wealth. migrate from its side of the field to the Qatari side The United States might have been expected if Doha continued its development. to act as a peacemaker in the dispute, particularly With Qatar under pressure to confirm its as all those involved are ostensibly US allies. economic autonomy in the region, the North Although US President Donald Trump initially Field’s giant reserves will now finally be put to sided with Riyadh, Washington has taken a more the test.

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DMG416 Exprom advert 210x297 V1.indd 1 26/03/2019 08:27 CHINA PUSHES GAS REFORMS

Martin Daniel

Chinese demand for natural gas has fter three years of relatively slow growth, Chinese gas demand grew by 15.3% grown voraciously and is widely forecast A in 2017 and 18.1% in 2018, reaching to continue doing so. It is also expected 280.3bn m3 last year, according to National Development and Reform Commission data. By that a growing proportion of the gas contrast, gas production grew only 8.5% in 2017 will be supplied as LNG. But that won’t and 7.5% in 2018 to 161bm m3, according to the National Bureau of Statistics. That was well below necessarily translate into price volatility. plan, with production of non-conventional and The lessons of Winter 2017/18 have been especially shale gas proving problematic. The gap was fi lled by imports, which surged learned and the Chinese gas system is 26.9% in 2017 and 31.9% in 2018 to 124.6bn m3 now better placed to cope with the coal- last year, according to General Administration to-gas switching programmes which of Customs data. Imports may have only begun in the mid-2000s, but they accounted for 44% underly the country’s rapid growth in of total supplies by 2018. Pipeline imports 3 LNG demand. contributed almost 50bn m , while LNG imports jumped 40% year on year to almost 75bn m3. Gas consumption is projected to continue growing strongly, driven by industrial, residential and power generation demand. In early 2019, the

state-owned energy company CNPC projected PHOTO: ISTOCK.COM/AKIYOKO

LNG CONDENSED | NATURALGASWORLD.COM 13 Chinese gas consumption and production (bn m3)

Production Consumption Implied Imports

300

250

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150

100

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BP Statistical Review 2019

a demand increase of about 10% to 308bn m3 in 2019. In April, fellow state energy company “While LNG imports are projected Sinopec projected gas consumption would reach to rise, there is no reason why 326bn m3 in 2020 and 500bn m3 in 2030. this should result in a spike in In June, the International Energy Agency’s (IEA) Gas 2019 projected demand at 450bn m3 in 2024. international spot LNG prices similar Longer term, growth is expected to moderate. to that experienced in winter 2017-18.” BP’s Energy Outlook 2019 projected consumption of 641bn m3 in 2040, based on growth of 4.4%/ year from 2017. While demand growth may moderate, it is almost universally expected to outstrip local production. CNPC has projected output growth of 6% to 171bn m3 in 2019, in line with first half production of 86.41bn m3. The IEA forecast higher Chinese 13th plan gas production growth, at 8%/year to 2024, but output of 242bn targets and actuals (bn m3) m3 would still leave a gap of 208bn m3 to be met by imports. Further out, BP projected growth of 4%/yr to 367bn m3 in 2040, requiring imports of Target Actual Shortfall 274bn m3. 2015 135 135 0 2016 147* 137.9 9.1 IMPORT PROSPECTS 2017 160* 149.2 10.8 2018 174* 161.5 12.5 The imports will include a substantial amount of piped gas. Myanmar supplies 3-4bn m3 2019 190* n/a 15** annually, but most current piped imports come 2020 207 n/a n/a from Turkmenistan, Uzbekistan and Kazakhstan. 3 ** Extrapolated Together, they supplied 46.9bn m in 2018 through ** Author estimate based on 1H2019 actual of 86.41bn m3 the three-pipe Central Asian system, according to Sources: NDRC, NBS, BP Statistical Review China’s CNPC International Pipeline Co. Central Asian pipeline capacity is expected to increase from 55bn m3 to 60bn m3 in the near future as new compressors are installed.

LNG CONDENSED | NATURALGASWORLD.COM 14 Chinese gas imports 73.5 since 2007 (bn m3)

Piped Imports LNG Imports 52.9 47.9 39.9 36.8 36.8 32.4 30.3 27.3 26.4 25.1 25 20.8 20.1 16.9 13.6 13 8 4.6 3.9 3.4 0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total: Total: Total: Total: Total: Total: Total: Total: Total: Total: Total: Total: 3.9 4.6 8 16.4 30.5 40.8 51.5 57.5 59.4 73.5 92.8 121.3 Source: BP Statistical Review 2019

However, actual imports in 2018 were some 4.5bn m3 lower than the planned level of 51.3bn m3 Chinese LNG imports by because of glitches in Turkmen supplies. Following a similar shortfall in 2017 this appears to have 3 country in 2018 (bn m ) exacerbated Chinese concerns about over-reliance on Central Asian imports. Initial operation of a Other fourth pipeline -- the 30bn m3/yr ‘D’ project – has Oman 6.2 already slipped from 2016 to 2022 at the earliest. 0.7 Russia 1.3 Piped imports will nevertheless grow substantially in the near future. The 38bn m3/ Nigeria Australia yr Power of Siberia-1 pipeline from Russia is 32.1 1.5 scheduled to enter operation by year end and United States 3 ramp up to full capacity in the mid-2020s. But plans for a second, 30bn m3/year line from Siberia Papua New Guinea remain at an early stage, while a third mooted 3.3 Russian project is even further off. TOTAL Piped imports could thus range from 98bn m3 73.5 to 158bn m3 in the second half of the 2020s. The lower end of the range may on balance be more Indonesia 6.7 likely. While pipeline gas may be cheaper than LNG in much of China, there appears to be decreasing government and industry enthusiasm for capital- intensive projects that take years to implement and lock the country into long-term contracts with a small Malaysia number of suppliers – other than using them as 7.9 leverage to seek better terms from LNG producers. Qatar It is thus likely that a large amount of additional 12.7 LNG will be needed. The IEA projected in June that Chinese LNG imports in 2024 would reach Source: Various 109bn m3 (80.1mn mt). Meeting this figure will require more regasification plant. The capacity of the country’s

LNG CONDENSED | NATURALGASWORLD.COM 15 Existing and planned pipeline 20 LNG terminals is currently about 84bn m3. Securing the capacity should not prove difficult, 3 gas supplies (bn m /yr) since expansion projects at existing plants could provide 54bn m3, while about 30 new terminals are Line Capacity Status planned. The country’s existing terminals also often work above nameplate capacity in part because Central Asia A to C 55 Operational of LNG trucking operations where imported LNG Central Asia A to C upgrade 5 Planned 2020 is not regasified at the terminal but taken by truck in land. In January, the government indicated Operational but with nameplate capacity could reach 336bn m3 by 2035. Myanmar 10 actual sales of 3-4 bn m3/yr LESSONS LEARNED Planned for 2022 but Central Asia D 30 currently stalled While LNG imports are projected to rise, probably steeply, there is no reason why this should result Planned Dec 2019, full in a spike in international spot LNG prices similar Power of Siberia-1 38 supply circa 2025 to that experienced in winter 2017-18. Lessons from that episode have been learned, and many Power of Siberia-2 30 Timing to be decided of the measures needed to avoid a repetition have Power of Siberia-3 n/a Initial proposal only already been put in place. The winter 2017-18 spike may have resulted Source: Various from a global supply-demand imbalance, but the underlying cause was bad planning in China, combined with bad timing. In 2017, the Chinese authorities switched a large number of industrial and commercial enterprises from coal to gas for environmental reasons. At the same Chinese gas use by sector, 2016 time 28 northern Chinese cities switched four million residential consumers – a third more than originally planned. Gas demand surged. The swathe of coal-to-gas conversions coincided with a colder than usual winter in China and elsewhere in Asia. It also coincided with inadequate infrastructure to distribute gas 3 bn m % to many of the new consumers, and insufficient forward purchases of gas by China’s main LNG Primary industry 15.36 7.4 procurers. The outcome was worsening gas shortages, unheated schools and homes, and Secondary industry 77.06 37.1 China’s state energy companies scouring the Power generation 41.44 19.9 international market for LNG at any price. The crisis resulted in a number of initiatives, Residential 37.98 18.3 the most eye-catching being the large-scale, long- distance trucking of LNG from southern terminals Commercial 5.37 2.6 to northern consumers. But most of the initiatives Transport, storage etc 25.48 12.3 have involved kick-starting longstanding proposals to reform China’s gas system. Others 5.11 2.5 The success of the measures can be gauged by the unexceptional conditions in winter 2018/19. Admittedly warmer than the preceding winter, and Source: China Energy Statistical Yearbook 2018 with China’s state energy companies having been on an LNG buying spree in preceding months, there were no significant gas shortages or price turbulence.

LNG CONDENSED | NATURALGASWORLD.COM 16 residential customers converted from coal to gas “The 2017-18 gas shortages, price or electricity in 2018, while local media reports suggest that Henan and Hebei provinces alone spike and associated bad publicity will convert almost four million more households have galvanised the Chinese from coal to gas or electricity in 2019. To ensure sufficient gas is available the authorities into promoting policies government wants more new LNG import that had seen only glacial movement terminals to be located close to demand centres. It also wants part of the new capacity to be for years.” owned by companies other than the three main state energy companies, CNOOC, CNPC and Sinopec, to inject competition into the market. There have also been moves to optimise the LNG trucking continued, but reverted to its use of the three incumbents’ existing facilities. primary role of supplying industrials and city Third-party access to their terminals was gas grids unconnected to the main pipeline mandated in mid-2018, although industry sources system. Trucking LNG to small and medium-sized say it is still tightly controlled by the main state customers located relatively close to import companies. terminals, where the alternative is building spur pipelines, is both economically viable and NEW GAS INFRASTRUCTURE increasingly common. In 2018, consultancy Wood Mackenzie noted that trucking accounted for Gas transmission and distribution infrastructure 12% of Chinese LNG movements in 2017 and is being promoted in tandem with the expansion projected a doubling to 38mn mt by 2025. of LNG import capacity and consumer numbers. A national pipeline company which will allow third IMPLEMENTING REFORMS party access to the 76,000 km of trunk lines is at an advanced stage of planning. Among the reforms given impetus by the 2017- The expansion of underground gas storage is 18 price spike was the partial liberalisation also being promoted. This is not least because of city gas sales to residential users. These residential demand is characterised by more customers previously paid state-set prices that peaky seasonal and diurnal patterns than industrial had increasingly fallen below cost as the share gas use. Storage capacity currently stands at of more expensive imports in overall gas supply only 3% of annual consumption, but by 2020 the rose. Under the new structure residential sales three state energy companies are required to are moving to the city gate prices benchmarked to have storage equivalent to at least 10% of their fuel oil and LPG which have been paid for years by contracted sales, while city gas companies should industrial and commercial customers. have 5%. Beijing’s eventual aim is for wholesale prices There is no question the 2017-18 gas to directly reflect international prices rather than shortages, price spike and associated bad those of alternative fuels, making consumers publicity have galvanised the Chinese authorities more responsive to price signals. To this end, gas into promoting policies that had seen only glacial trading hubs have been established at Shanghai movement for years. At the same time, China and Chongqing. is invariably cautious in implementing new The emphasis of the coal-to-gas conversion measures, especially ones which involve ceding programme has been revised to ensure the state control, meaning the creation of a liberalised guiding principle is a coordinated approach rather gas market could be years away. than the highest number of conversions. In There is little doubt that until then China will particular, switches can now only be implemented cause future global gas supply glitches and price if backed by guaranteed gas availability and spikes. But there is also little doubt that China infrastructure. is already better placed to cope with them – not The numbers switching nevertheless remain least through the availability of a large fleet substantial and account for a significant part of of LNG trucks able to remedy any distribution the growth in gas demand. About 4.8 million problems.

LNG CONDENSED | NATURALGASWORLD.COM 17 OIL PRICES AND THE US LNG JUGGERNAUT

Ross McCracken

According to a Reuters report, LNG espite general European antipathy towards hydraulic fracturing, it is bagged a 14% share of the European gas D ‘fracking’ which has delivered this market in the period October 2018 to tsunami of cheap gas. In doing so, it addresses a fundamental long-standing driver of European August 2019, up from 5% in the same energy policy – the fear that as European period a year earlier. Gas Infrastructure domestic gas production falls, Europe will become ever more dependent on the few major Europe reports that gas storage in pipeline exporters that provide the majority of its Europe was 89.65% full as of August imported gas supplies -- with Russia to the fore. That concern now looks much less severe 20, with storage in Austria, Belgium, thanks to US LNG, largely derived from shale the Czech Republic, Denmark, France, drilling. The EIA reported that the US last year saw one of the largest absolute increases in oil and Germany and the Netherlands over 90%. gas production from a single country in history. European gas prices reached a 10-year low in July … yet still the LNG comes. DEMAND FOLLOWS INVESTMENT What is truly astonishing about the US gas story is how it appears to defy economic logic. As

LNG CONDENSED | NATURALGASWORLD.COM 18 US oil shale drilling drives gas output

Oil (thousand b/d) - left axis Gas(mn ft3/d) - right axis

14,000 140,000

12,000 120,000

10,000 100,000

8,000 80,000

6,000 60,000

4,000 40,000

2,000 20,000

0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: US Energy Information Administration

demand for a commodity rises, so too should the price. “ The only factor which And demand has risen. US gas exports to Mexico increased more than five fold between could unseat the US May 2009 and May 2019 to 152,117mn ft3. LNG juggernaut is the Exports to Canada were up 52% over the same period, while imports of Canadian gas to the US oil market.” have dropped by 3.7%. At the same time, LNG exports have risen from zero at the start of 2014 to 144,837mn ft3 in May. And it is not as if the US is not using more gas Shale wells generally produce a mix of liquids, itself; domestic gas consumption jumped from 23.3 condensates and gas. Over the last decade the trillion ft3 in 2008 to almost 30 trillion ft3 in 2018. proportion of US oil produced from shale wells Yet over this extraordinary period of demand has risen dramatically from near zero to 59% expansion, prices have trended down. The in 2018 – some 6.44mn b/d, according to EIA average monthly price for natural gas at Henry data. As a result, US oil and gas production have Hub in July was just $2.37/mn Btu. Places, such become more rather than less correlated. as the Permian basin, where production has US oil and gas production trended upward overtaken takeaway infrastructure have seen even from 2011 to April 2015 as the shale revolution lower values, and, on occasion, negative ones. got into full swing. But towards the end of 2014, oil prices started to fall fast and by the beginning PRODUCTION CORRELATION of 2015 were below $50/barrel for US benchmark West Texas Intermediate (WTI), roughly half Demand has not led US upstream gas the value a year earlier. The lagged impact of investment, it has followed it, and the reason for low prices had a quick impact on US shale oil this is oil. production, which started to fall from April 2015

LNG CONDENSED | NATURALGASWORLD.COM 19 US oil and gas spot prices

WTI ($/b) - left axis Henry Hub gas ($/mn Btu) - right axis

160 16

140 14

120 12

100 10

80 8

60 6

40 4

20 2

0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: US Energy Information Administration

the flexibility of leaving wells drilled but “ The US gas story appears to defy uncompleted. Federal offshore Gulf of Mexico oil field production, for example, has risen steadily, economic logic; as demand for a but unspectacularly, year on year since 2013, commodity rises, so too should largely as a result of investment decisions made in the period 2011-2014 when WTI averaged the price.” around $95/barrel. The implication is that the only thing that can unseat the US gas juggernaut is the oil market.

from 9.65mn b/d to 8.51mn b/d in September OIL-GAS LINKS 2016 – a drop of 11.8%. The impact on natural gas production was clear This is somewhat ironic in that the gas industry but not nearly so dramatic. Over the same period, has for decades been trying to disassociate the gross withdrawal of gas fell from 92.0 trillion ft3/d price of gas from that of oil. There are plenty of to 87.5 trillion ft3/d, a decline of 4.9%. Both oil and reasons to do so. gas production then started to rise in tandem to Gas versus oil competition in the power current levels. and heating sectors has declined steadily. This leads to three observations: that US gas The evolution of traded gas markets in the US production is driven in large part by the US oil and Europe provide transparent prices for gas price; that gas production is much less responsive as a commodity in its own right where gas’ than oil to price; and that shale production overall competitors are more often coal and increasingly is much faster to react to changes in commodity power generated from renewable energy sources. prices than conventional oil and gas output. The move away from oil indexation in gas Conventional production is driven by contracts has meant gas prices are less affected large projects with long lead times, without by the complex geopolitics of the oil market.

LNG CONDENSED | NATURALGASWORLD.COM 20 Monthly US natural gas feedstock and liquefied natural gas exports

Natural gas feedstock to LNG Export terminals LNG Exports

3 Forecast

Billion cubic feet per day 2

0 2016 2017 2018 2019

Source: US Energy Information Administration

However, this process of disassociation is through the Strait of Hormuz, owing to the stand- not complete nor necessarily stable. Increased off between the US and Iran over the latter’s use of ethane from gas processing in the nuclear programme and US sanctions. petrochemical sector now competes with Third, two Opec producers are in a state the oil product naphtha as a feedstock, while of crisis. Mismanagement and economic refinery own use of natural gas has displaced collapse alongside US sanctions have crippled former use of fuel oil and other oil products. the Venezuelan oil sector and, although it has Moreover, increasing use of gas in transport, as so far had only a relatively minor impact on oil both Compressed Natural Gas and LNG, once production, civil war continues to rage in Libya. again puts gas in direct competition with oil for However, these supportive factors are being market share. outweighed by the multitude of economic The third area of new linkage is, as noted, US indicators which suggest the world is on the brink shale drilling, which underpins the expansion of of recession. The OECD’s Composite Leading US LNG production. Indicator stood at 99.06 in June having declined steadily for more than a year to the lowest level OIL MARKET OUTLOOK since the 2008/09 financial crisis. Moreover, having started the year with As a result, LNG observers need to keep a close expectations that the US-China trade war would eye on the oil market, where there is an impressive be quickly resolved, the oil market has seen array of factors supportive of the oil price. it go from bad to worse to worse still. All this First, production curbs by the Opec plus group bodes ill for global trade volumes which are a key with Saudi Arabian overcompliance providing the determinant of oil demand. back bone. Opec output in July was 29.88mn b/d, In addition, on the supply side, while Opec is a five-year low. reigning in production, new volumes coming to Second, heightened tensions in the Middle market in 2020 from non-OPEC producers look East as a result of the threat to tanker traffic robust. In its latest Short Term Energy Outlook,

LNG CONDENSED | NATURALGASWORLD.COM 21 US rig counts head south

Oil rigs Gas rigs

1,200

1,000

800

600

400

200

0 AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG 2018 2019

Source: Baker Hughes

US shale drillers are burning through cash “ US shale drillers are burning and the number filing for Chapter 11 bankruptcy protection is rising. The lack of returns is closing through cash and the number off finance. A study by consultants Rystad Energy filing for Chapter 11 bankruptcy for the first three months of the year showed roughly 9 out of 10 US shale drillers were cash protection is rising.” flow negative. If a recessionary outlook is assumed, oil demand forecasts will continue to fall and with them oil prices and US shale drilling activity, the EIA forecasts an increase in non-Opec oil which will worsen the financial stress already supply of 2.24mn b/d for 2020, of which 1.54mn evident in the sector. If this turmoil results in a b/d will be from the US, while world demand will slowdown in oil production, it is likely to have a rise by only 1.43mn b/d. knock-on impact on US gas production similar to These countervailing factors have seen the last contraction in US shale drilling. Brent crude prices trend down towards $60/b in The US will then find itself in an unfamiliar August from a high in April of $74/barrel, with the position. Steadily rising demand for gas as long- discount for WTI to Brent about $6/barrel. lead time infrastructure – notably LNG plants – are completed, but a slowdown in production growth. US SHALE PATCH STALLS This is likely to push gas prices higher. Just as gas prices have fallen as oil prices rose, There are already signs that the US oil patch is the reverse will go into effect, which would come stalling. The US oil rig count – the number of as an unwelcome surprise both to US users of rigs actively drilling for oil – had dropped from gas, but also their European counterparts who 877 at the beginning of the year to 754 on have this year become used to very low prices for August 23. imported US LNG.

LNG CONDENSED | NATURALGASWORLD.COM 22 COUNTRY FOCUS: SPAIN’S ENERGY TRANSITION

With ambitious climate change targets in pain was the fi rst country in the world to build a major regasifi cation terminal for place, including an intention to generate S LNG, completing the onshore Barcelona all electricity from renewables by 2050, terminal in 1969, which now has import capacity of 12.8mn mt/yr. This was followed by Huelva Spanish energy policy encapsulates but (8.0mn mt/yr) in 1988 and Cartagena (8.9mn mt/ does not resolve the issue of whether yr) in 1989, then Bahia de Bizkaia (5.1mn mt/yr) in 2003, Saggas (6.7mn mt/yr) in 2006, Mugardos natural gas is a transition or a destination (2.6mn mt/yr) in 2007 and fi nally El Musel (5.4mn fuel. Given the need for a massive reboot mt/yr) in 2013. 3 of the country’s renewable energy sector, This provides 49.5mn mt/yr (67.3bn m ) of regasifi cation capacity, of which less than 25% combined coal and nuclear phase outs was utilised in 2018. should support gas and LNG use over the The country also has spare gas pipeline import capacity of about 3.6bn m3, based on 2018 imports, medium term. from Algeria via the 12bn m3 Magreb-Europe pipeline and the 8bn m3 Medgaz pipeline. A capacity expansion of 1.8bn m3 is underway for Medgaz via the addition of a new compressor and could rise further through a combination of more compression power and construction of a

LNG CONDENSED | NATURALGASWORLD.COM 23 Bilbao Plant Mugardos Plant Spain’s Gas Infrastructure

Barcelona Plant Proposed Pipeline (Midcat) Exisitng Pipelines LNG Import Facility Number of LNG Tanks Sagunto Plant Compressor Station Planned Compressor Station Underground Storage Units Under Construction

Natural Gas Field Hueva Plant Cartagena Plant

Canary Islands

Source: Enagas

new 4.5bn m3 loop line in Algeria from El-Aricha This year LNG use has been much stronger. In to Beni-Saf, the starting point of Medgaz, which is the first half of the year, regasification was 35.5% planned for 2020. higher than the three-year average for the period Interconnections between the French and at 550GWh/d. Spanish gas demand for power Spanish gas markets have also been improved in generation in July was 45% higher than in July recent years. There are two pipelines which cross 2018, owing to high temperatures and increased the border at Larrau and Biriatou with exchange air conditioning use, according to system capacity of about 7bn m3 a year. These lines are operator Enagas. under-utilised and projects – MidCat and STEP Spot LNG prices have fallen to near 10-year -- to build new Spain-France interconnections lows making LNG more competitive with pipeline aimed at transporting regasified LNG from Spain gas and making gas-fired generation more into France do not appear to have attracted competitive versus coal-fired generation. LNG commercial interest. imports in May were up 68% on May 2018, while pipeline supplies from Algeria dropped 41.3%. In DECLINING MARKET SHARE June, LNG imports rose 48.9% year on year.

LNG’s share of the Spanish gas market has CLIMATE CHANGE TARGETS trended downward since reaching a peak (77.8%) in 2010 to just 47.8% last year, while pipeline gas Spain’s longer-term demand for LNG remains imports have increased. Spanish gas demand in uncertain. It has a fleet of 24.5 GW of Combined 2018 was 31.5bn m3, down from 40.6bn m3 in Cycle Gas Turbines, which last year saw utilisation 2008 before the global financial crisis. Of the 2018 rates averaging around 10%. In addition to the total, just under half – 15bn m3 – was met with boost from low gas prices this year, gas-fired LNG. The country depends on LNG and pipeline power generation should benefit longer term imports for practically all of its gas consumption. from the phasing out of both coal and nuclear

LNG CONDENSED | NATURALGASWORLD.COM 24 Spanish gas consumption and LNG imports (bn m3)

LNG Imports Pipeline (implied) LNG Imports (% of total demand)

45 90 40 80 35 70 30 60 25 50 20 40 15 30 10 20 5 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BP Statistical Review of World Energy

power, but it will be challenged by plans to raise with total capacity of 7.1 GW. Their current renewable energy generation substantially. operating licenses run from June 2020 through to The government plans to close all coal-fi red November 2024. Operation beyond these dates, plants by 2035, but existing closure plans saw the which is implied by the 2035 target, depends 347-MW Anllares unit shuttered in December 2018. on licence renewals. According to current plans, A further nine plants, with combined capacity of Spain’s nuclear fl eet will start to shut down 9.5 GW, are expected to close by mid-2020, leaving from 2027, with the last unit, Trillo I, to go in just 4.3 GW of coal-fi red generation in operation. 2035. Nuclear energy provided 20.2% of Spain’s This is expected to coincide with the closure of electricity in 2018. the country’s last domestic coal mines. The impact from reduced coal burn should thus be felt well GAS-FOR-POWER GENERATION TO FALL before the 2035 deadline. Coal-fi red generation in 2018 accounted for 14% of Spanish electricity. However, the government’s intention is not for The government also plans to close all nuclear gas-fi red generation to rise. Spain has set a target of plants by 2035. Spain has seven nuclear plants generating 74% of its electricity from renewables by in operation, built between 1981 and 1988, 2030, with the aim of all electricity being generated

Spanish electricity generation by source (TWh)

Gas Nuclear Wind Coal Hydro Oil Solar Other RES Other

350

300

250

200

150

100

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: BP Statistical Review of World Energy

LNG CONDENSED | NATURALGASWORLD.COM 25 Spanish gas demand dominated by industry (TWh/yr)

Gas demand for power Non-generation gas demand

300

250

200

150

100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Enagas

Spain’s nuclear phase out However, renewables growth may not keep pace with the government’s plans. Renewable generation Plant Start date Capacity (GW) Closure date has been essentially fl at since 2013. Spanish Almaraz I 1981 1.011 2027 wind capacity grew by just 1.5% last year, while solar capacity grew by a meagre 0.3%. In short, Almaraz II 1983 1.006 2028 following a period in which subsidies have been Asco I 1983 0.995 2029 heavily reduced, including retrospectively, Spain’s renewable energy sector needs a massive reboot. Asco II 1986 0.997 2033 Renewables, not including hydro, generated Cofrentes 1985 1.064 2030 just 70.7 TWh of electricity last year. To meet the Trillo 1 1988 1.003 2035 decline in coal-fi red power and nuclear by 2035 and then gas by 2050, the sector will have to Vandellos 2 1988 1.045 2033 treble in size, assuming little growth in overall Source: Various electricity demand as a result of energy effi ciency measures and limited population growth. But there is also the question of transport, which by renewables by 2050. In pursuit of this goal, grid could prove an area of demand growth for gas in operator Red Electrica de Espana expects 6 GW of a number of ways: fi rst via direct use of CNG and renewable energy capacity to be added by the end LNG in transport; second as a result of growing of this year with further expansions thereafter. demand for electricity as a result of electromobility; In 2018, gas-for-power generation made up and third as a potential feedstock for hydrogen 17.7% of total Spanish gas demand. The majority combined with Carbon Capture and Storage. of demand comes from industry, which accounted Oil products made up 50.7% of fi nal energy for 60% of total consumption in 2018, rising 4.1% consumption in Spain in 2016, compared with from 2017 in comparison with an 18.3% drop for 24.3% for electricity. Transport accounted for gas-fi red generation. Non-generation gas demand 42.3% of fi nal energy demand. has risen from 262 TWh/yr in 2008 to 287 TWh/ Transport decarbonisation could thus have yr in 2018, while gas-for-power generation was a a huge impact on the power and gas sectors. third of its 2008 peak. Combining transport decarbonisation with a decline in gas-fi red generation would mean that LOOKING AHEAD renewables would need to expand even faster, not to mention the impact on grid operation Assuming that broader decarbonisation efforts of the removal of both baseload and fl exible do not impact use of natural gas outside of the generation plant. power generation sector – which on a 2050 As a result, Spain’s intention to generate all timeframe is unlikely -- the removal of gas-fi red electricity from renewables by 2050 is ambitious generation from the energy mix would see even if viewed in isolation as a power sector Spanish gas demand below current levels in policy, but the evolution of gas and LNG demand 2050 based on the average annual rate of growth overall may well be decided by broader economic for non-generation gas use over the last decade. decarbonisation efforts.

LNG CONDENSED | NATURALGASWORLD.COM 26 PROJECT SPOTLIGHT: WOODFIBRE LNG

While LNG Canada grabbed the In May, PO&G announced a defi nitive agreement to acquire Calgary producer Canbriam headlines late last year by becoming Energy. Canbriam has an asset base in the prolifi c Canada’s fi rst LNG project to take a Montney shale gas area of British Columbia and Alberta, where it is currently producing about positive fi nancial investment decision 200mn ft3/day of natural gas and 6,000 b/d of (FID), another scheme – Woodfi bre LNG associated natural gas liquids. The acquisition was completed in June. – has steadily been passing milestone A second major development was the after milestone and now looks well announcement in July that UK oil major BP had placed to take the second spot. signed up as a foundation buyer. PO&G and BP signed a binding LNG sales and purchase agreement that will see BP purchase 0.75mn mt/ yr from the export facility. The contract will run for 15 years on a free on board (FOB) basis. ot only that but given its smaller scale and relatively short Woodfi bre LNG, which has a license to export new pipeline connection requirements, Woodfi bre could for 40 years, has also been in negotiations with N become Canada’s fi rst LNG project to actually produce LNG, China’s Cnooc and a Japanese utility regarding if the company developing it takes an FID this year as expected. offtake agreements for the remainder of the LNG. First LNG from the 2.1mn mt/yr facility is planned for 2023. LNG Shortly thereafter, in early July, Woodfi bre Canada is targeting 2023/24 from its much larger facility, which have received its LNG facility permit from provincial two trains of at least 6.5mn mt/yr each. regulator the BC Oil and Gas Commission, one Woodfi bre also carries with it particular signifi cance for Canada’s of the last permits required before starting gas producers as it will tap into Canada’s current gas supplies construction. The project previously received rather than develop greenfi eld resources. It will thus be the fi rst three major environmental assessment approvals, export project to drain some of Canada’s gas surplus, which has including a fi rst-of-its-kind environmental approval steadily backed up as the US has developed its shale gas resources. from the Squamish First Nation, on whose Canadian natural gas prices have been pushed well below already traditional territory the C$1.8bn project will be built. low Henry Hub prices in the US and on August 16-18 sank to below Then, in August, Woodfi bre LNG announced 10cts/GJ in Alberta. that it had placed an order for the main cryogenic heat exchanger, a clear expression of confi dence 2019 MILESTONES in the project’s viability. Woodfi bre LNG CEO David Keane said: “This purchase indicates Pacifi c Oil & Gas (PO&G), a privately-owned Indonesian company is Woodfi bre LNG’s continued commitment to behind the Woodfi bre LNG project. PO&G is owned by Singapore’s moving forward towards our FID and start of

Royal Golden Eagle group of companies. construction later this year.” PHOTO: WOODFIBRELNG.CA

LNG CONDENSED | NATURALGASWORLD.COM 27 Woodﬁbre LNG Howe Sound

Vancouver

C A N A D A U N I T E D S T A T E S

SITE LOCATION Feedstock for the plant will be supplied by the Eagle Mountain-Woodfibre gas pipeline Woodfibre LNG will be built on an industrially- project, a 47-km, 24-inch extension of the zoned site which formerly housed a paper mill existing FortisBC gas pipeline running between that closed in 2006. Woodfibre officially became Coquitlam and Woodfibre near Squamish. the owner of the site in 2015, following an This pipeline was built in 1990 and serves extensive clean-up of contaminated sediment, Squamish, the Sunshine Coast and Vancouver wood chips, equipment and creosote panels left Island. PO&G has also been in talks with BP by the paper mill operations. Remediation efforts Canada regarding transportation and balancing are continuing under Woodfibre’s stewardship. services for gas supplies to the planned LNG The project, located in the traditional export facility. Squamish village of Swiyat on unceded Squamish In 2016, engineering firm KBR was awarded a Nation lands, is expected to create up to 650 multi-phased contract for Front-End Engineering construction jobs and about 100 full-time and Design (Feed). The work included Feed operational jobs. optimization, pre-FEED, FEED, and development The site has a deep water port and is connected of a fixed price offer for engineering, to BC Hydro, which will allow the LNG facility to be procurement and construction (EPC) services. powered largely by renewable electricity reducing The final EPC contract is expected to be its carbon footprint. However, upgrades to the awarded soon. existing 138kV transmission line between the Canada’s recent record on large energy Gibsons and Cheekeye substations will be required projects has been shaky to say the least, and as will a new switching station and connection to additional sales and purchase agreements are the 500kV line adjacent to the Woodfibre site. likely to be needed to underpin the project’s Using BC Hydro power will, according to financing, but Woodfibre has made steady Woodfibre LNG, make its facility one of the progress this year, clearing many of the major cleanest LNG plants in the world. The processing hurdles on any project’s pathway. If the FID facility will also be cooled by air rather than is taken as planned, with a second plant seawater as per the environmental agreement underway, Canada’s nascent LNG industry will with the Squamish nation. be becoming a reality.

LNG CONDENSED | NATURALGASWORLD.COM 28 TECHNOLOGY: TAKING THE

A growing number of small-scale and t is perhaps no surprise that smaller trains have become popular at the same modular liquefaction projects around I time as floating LNG. Both technologies the world are either under construction offer some flexibility in scale and location. Small-scale LNG is also regarded as being easily or planned. Standardised components scalable, meaning that operators can add extra and simplified plant control systems are capacity incrementally, benefiting from early cash flow and less initial capital expenditure ahead of a some of the benefits that are encouraging project reaching full capacity. their development. The International Gas Union (IGU) defines small-scale LNG trains as those with less than 0.5mn mt/yr liquefaction capacity, while some in the industry push the upper limit to 1mn mt yr. There has also been more interest in developing mid-size trains with production capacity between 0.5mn mt and 1.5mn mt, where output can be sold in its entirety to a single customer. Paul Sullivan, Worley Parsons senior vice president global LNG and FLNG, said that the industry has moved somewhat away from only developing large LNG trains to a more flexible approach. He said: “The economics of the

LNG CONDENSED | NATURALGASWORLD.COM 29 Calcasieu Pass

Calcasieu Ship Channel

Calcasieu Pass LNG plot plan Gulf of Mexico

process have changed. The new thinking in the feedstock is in place can delay the development industry is that bigger is not always better”, so of large LNG projects, but smaller trains require some projects have “begun moving more towards less gas and so the final investment decision can an incremental build up” that ties in “with the be taken at an earlier stage on modular projects. parcels of LNG that customers are buying”. Venture Global’s Calcasieu Pass LNG project, The trend towards smaller trains has also been which received a positive final investment supported by the emergence of a second tier decision (FID) in August, for example, will consist of LNG customers who want smaller volumes, of nine 1.2mn mt liquefaction blocks to achieve including for transport. The LNG industry was total capacity of 10.8mn mt/yr, rather than one or built on liquefying substantial but stranded gas two ‘mega’ trains. The closure of financing prior to reserves for shipping to big buyers – often utilities FID for the facility indicates investor confidence in – in Asia. The time taken to guarantee sufficient the small train modular approach.

LNG CONDENSED | NATURALGASWORLD.COM 30 COST BENEFITS diseconomy of small scale and to reduce initial investment cost.” Modular trains can be manufactured at a central factory and then transported to where PROJECT CHALLENGES they will actually be used. It also means that they can be moved if and when they Small-scale LNG projects are still relatively new, are needed at a different location. Some so there should be scope for improving efficiency developers have lauded the space saved with and cutting costs over time. However, new small projects, but modular designs with lots technology often experiences problems and there of units may not actually save much space per have been delays to some of the most high-profile unit of energy produced. modular projects, including Kinder Morgan’s Elba Proponents argue that smaller trains are less Island project in the US state of Georgia, where capital-intensive, while mass fabrication can each of the ten trains has production capacity of result in more uniform standards with higher 0.25mn mt/yr. quality welding. It is also argued that it can reduce The scheme is using Shell’s prefabricated the time taken to develop projects by about six off-site Movable Modular Liquefaction System months, while the McKinsey Global Institute and all output is to be sold to Shell under a estimates that it can cut costs by up to 15%. 20-year contract. After several deadlines for The pressurised LNG tanks used on small- first production were missed, the company scale projects can reduce the cost of storing small said in a statement in June that the project had volumes of LNG in comparison with conventional encountered “common commissioning issues” atmospheric flat bottom tanks. Modular projects but did not disclose what they were. can also avoid the use of expensive boil-off However, the time taken to install and align the gas technology. On the downside, spreading compressor modules at Elba Island was reduced production over a much higher number of trains from three months to three weeks by using post- and probably locations mean more complex safety processing software, laser trackers and portable inspection processes. coordinate measuring machines. Baker Hughes GE (BHGE) says that its According to Dimensional Engineering, which small-scale modular LNG plants offer faster worked on the project, the digitisation of the commissioning times and lower installation costs actual modules helped to make welding more through standardized plug-and-play designs accurate by identifying challenges before the and a simplified plant control system that can work began. However, until such projects have be customized for each project, plus lower been completed and have operated successfully maintenance costs. BHGE plants can produce for a number of years, it may be difficult to reach between 25 and 1,200 kilogallons of LNG per day conclusions over their costs in comparison with (946-4,542m3/d). large LNG projects. BHGE’s single-cycle compression expansion refrigeration process uses self-boil-off gas as CHART INDUSTRIES TARGETS a refrigerant or a single refrigerant such as MULTIPLE PROJECTS nitrogen. The plant uses mixed refrigerant cycles: pre-cooled and single cycle. The former uses a In August, Chart Industries announced that it had conventional refrigeration circuit with ammonia bought a 9% stake in Stabilis Energy for $7mn or propane for pre-cooling, while the latter uses to build on the work that the two companies a mixed refrigerant composed of nitrogen, have done to market small LNG technology in methane, ethane and butane. North America. They have already jointly built a According to research by the IGU, “the 100,000 gallons/day LNG plant in Texas to supply development and maturation of SSLNG [small small-scale industrial and mining users, including scale LNG] technology are key enablers for the in Mexico. Chart supplied the liquefaction pursuit of the SSLNG business. Here, significant train, storage, gas pre-treatment and truck progress has been made in all areas across loading facilities. The CEO of Chart Industries, the value chain. In the liquefaction plants, the Jill Evanko, said: “We expect over $650mn of development and optimisation of a wider range of opportunity in this market for our products in the processes and equipment helped to counter the next three years.”

LNG CONDENSED | NATURALGASWORLD.COM 31 CONFERENCES & EVENTS

World Energy Congress Tanzania Oil & Gas Conference September 9-12 October 2-3 Abu Dhabi, United Arab Emirates Dar es Salaam, Tanzania wec24.org cwctog.com

South America Energy Week 4th International Green & Smart September 10-11 Shipping Summit Buenos Aires, Argentina October 8-9 energycouncil.com/event-events/ Rotterdam, Netherlands south-america-assembly-southern-edition/ gssummit.org

SEP 6th London Gas & LNG Forum 2019 LNGgc September 11-12 October 8-10 London, UK London, UK energystreamcmg.com/forums/ energy.knect365.com/lnggc-london forums-seminars/6th-london-gas-lng-forum-2019 OCT China LNG & Gas Gastech Exhibiton & Conference 2019 October 16-17 September 17-19 Beijing, China Houston, USA chinalngsummit.com gastechevent.com European LNG Infrastructure CWC World LNG & Gas Series Morocco Development Summit Summit October 21-22 October 2-3 Barcelona, Spain OCT Marrakesh, Morocco lngevent.com cwcmoroccogas.com North America Gas Forum October 21-23 Washington DC, USA

energy-dialogues.com/nagf PHOTO: FLICKR.COM/KEES TORN

LNG CONDENSED | NATURALGASWORLD.COM 32 CONFERENCES & EVENTS

CWC World LNG Bunkering Summit Frankfurt Gas Forum November 5-6 December 11-12 Hamburg, Germany Frankfurt, Germany DEC cwclngbunkeringsummit.com energystreamcmg.com/forums/ forums-seminars/7th-frankfurt-gas-forum-2019 EAGC – European Autumn Gas Conference 2019 LNG Bunkering Summit 2020 November 5-7 January 29-30, 2020

Paris, France JAN Amsterdam, Netherlands theeagc.com oilandgasiq.com/events-lngbunkering NOV Oil & Gas Vietnam (OGAV 2019) American LNG Forum November 13-15 February 4-5 Vung Tau City Houston, United States oilgasvietnam.com americanlngforum.com

Mozambique Gas Summit & Exhibition International Gas Union, Research FEB November 20-21 Conference 2020, Gas Innovations for a Maputo, Mozambique Sustainable Future mozambique-gas-summit.com February 24-26, 2020 Muscat, Oman 2nd Gas & LNG Middle East Summit IGRC2020.com December 2-3 Muscat, Oman 6th International LNG Congress gasoman.com March 2-3, 2020 Brussels, Belgium

DEC CWC 20th Annual World LNG Summit & lngcongress.com Awards Evening

December 3-6 MAR 6th CWC China LNG & Gas International Rome, Italy Summit & Exhibition world.cwclng.com March 4-6, 2020 Shanghai, China

chinalnggas.com PHOTO: ISTOCK.COM/ARTHENDRIX

LNG CONDENSED | NATURALGASWORLD.COM 33 NEWS: GLOBAL LNG

access to transport large modules by sea,” LNG Canada STEEL INDUSTRY SAYS CANADA said in an email to NGW. “LNG Canada couldn’t wait for the expansion of the SENDING LNG JOBS TO CHINA capacity of BC module yards, nor could we assume any responsibility for building the capacity of Canadian steel A lobby group representing the Canadian steel industry fabricators, as some have suggested. Mega projects charged the federal government on August 20 with investing billions of dollars need to be based on the sending C$42bn worth of construction jobs to China by highest degree of certainty for cost and schedule. LNG waiving potential anti-dumping duties on fabricated steel Canada needs to take advantage of the existing supply/ modules for Canada’s two active LNG export projects. demand opportunity that currently exists in the global The two projects – LNG Canada’s 14mn mt/yr project energy market.” at Kitimat, on BC’s northern coast, and Woodfibre LNG’s The modules for the LNG Canada project weigh up 2.1mn mt/yr project at Squamish, north of Vancouver – to 7,500 metric tons each, and are as large as 40 metres will be built by assembling modules at fabrication yards high, 40 metres wide and 90 metres long. The average in Asia and shipped to the project sites, where they will module weighs 1,000 metric tons, and the 150 to 220 be assembled into liquefaction trains. modules that go into the project carry an aggregate “The modules will be connected on site, requiring weight of 140,000 to 200,000 metric tons. very few construction workers,” the Canadian Institute The largest modules that can be built in Canada – so- of Steel Construction (CISC) said in a statement. called ‘Alberta modules’ – weigh less than 160 metric “Essentially, in doing so, the largest project ever in tons, LNG Canada’s email pointed out. The maximum the history of Canada will be handed over to Chinese road weight in Canada is 75 metric tons, while the businesses and workers.” maximum legal height for road transport in BC is 4.15 CISC was reacting to an announcement by metres and the maximum width is 7.3 metres. Canadian finance Bill Morneau earlier in August that “From steel components and structures for the site, the LNG Canada and Woodfibre LNG projects would as well as manpower to assemble them, to steel for not be subject to anti-dumping duties that have been the pipeline that transports the gas, and steel required implemented by the Canadian International Trade upstream for structures, water treatment and handling Tribunal. A judicial review of the duties is currently facilities and wells – the Canadian steel industry stands underway, but CISC CEO Ed Whalen says Morneau to benefit greatly from LNG projects moving forward in should never have waived the duties for LNG Canada the province and the country,” LNG Canada said. and Woodfibre LNG. As many as 10,000 Canadian workers will be directly Canada has been assembling modules for many employed building the LNG Canada export terminal and years for major projects, the CISC statement says, and the Coastal GasLink pipeline that will deliver feed gas to claims as false any arguments that suggest “Canada the terminal. does not or can’t do” the fabrication work. “What is true is that international oil and gas companies want the lowest cost, China’s illegal dumping and subsidizing provides that, the government of Canada will offer the legal framework to allow this to CHEVRON STARTS CO2 happen and Canadian construction workers no longer have access to projects in Canada,” CISC charged in its INJECTION AT GORGON statement. LNG Canada has long maintained that the kind of Chevron Australia and the Gorgon joint venture module construction required of its project can’t be participants August 8 announced the safe start-up and completed in Canada – the modules are too large for operation of the CO2injection system at the Chevron- Canada’s existing fabrication yards and they’re too big to led Gorgon natural gas facility on Barrow Island, off the move over existing road or rail infrastructure. northwest coast of Western Australia.

“The only option possible would be to source Once fully operational, the CO2 injection facility will modules from module yards in BC that have coastal reduce Gorgon’s greenhouse gas emissions by about

LNG CONDENSED | NATURALGASWORLD.COM 34 NEWS: GLOBAL LNG

40%, or more than 100mn metric tons over the life of the injection project, Chevron Australia said. FUTURE FOR LNG BRIGHTER “The Gorgon facility incorporates many leading design features aimed at maximising energy efficiency THAN FOR PIPED GAS: IGU and minimising greenhouse gas emissions. In steady- state operations, Gorgon is anticipated to have the The International Gas Union says technology cost reductions lowest greenhouse gas emissions intensity of any LNG have unlocked new supplies of gas, which have led to the project in Australia,” Chevron Australia added. global LNG market tripling since 2000. Meanwhile, the cost The Chevron-operated Gorgon project is a joint of a new floating storage and regasification unit (FSRU) – venture comprising the Australian subsidiaries of including the necessary auxiliary facilities – can be half the Chevron (47.3%), ExxonMobil (25%), Shell (25%), Osaka cost of an onshore facility. And LNG tanker conversions into Gas (1.25%), Tokyo Gas (1%) and Jera (0.417%). receiving terminals are even cheaper. The Gorgon project is developing two gas fields – The report says out of 37 LNG importing markets in Gorgon and Jansz-Io. According to Chevron, the gas 2018, 11 gained access via floating capacity alone, and in the Gorgon field contains on average 14% naturally five had relied on both, on and offshore terminals. “Over occurring reservoir CO2 while the Jansz-Io field contains the coming years, many more new markets will gain less than one percent. access to LNG via new FSRU projects,” it said August 20.

The CO2 injection project facilities on Barrow In total, IGU sees the biggest growth among energy

Island include nine CO2 injection wells at three drill sources for gas, after renewables by 2040. According centres; two pressure management drill centres - four to BP, gas demand is expected to reach 5.4 trillion m3/ water production wells - two water injection wells; yr in 2040, from 3.868 trillion m3 in 2018. “Gas demand two reservoir surveillance wells; a seven kilometre growth is expected at 1.7% annually, increasing nearly underground pipeline from the LNG plant site to the drill 50% by 2040,” it said. centres and three CO2 compressor modules. But for international trade, pipelines are still the main route to market. Last year, about 431bn m³ of pipeline equivalent LNG were traded internationally, while pipeline gas sales were 804.5bn m3. The IGU also touches upon emissions, saying that the NORD STREAM 2 COMPLETES annual global cost of pollution was estimated at $3.8 trillion FINNISH SECTION in 2015 and projected to go up to $30 trillion in 2060. Offshore to become commoner (MTPA) The 374-km section of the Nord Stream 2 pipeline 50 running through Finland has been finished, Russia’s Onshore-only importers Forecast president Vladimir Putin announced August 21. “I can 40 Both onshore & FSRU inform you that construction of the pipeline in the FRSU only importers Finnish section, in the Finnish exclusive economic zone, 30 was completed,” he said at a press conference with 20 Finland’s president Sauli Niinisto. The Russian leader went on to thank Finland for its 10

“pragmatic approach” in backing the project, which aims 0 to flow up to 55bn 3m /year of gas under the Baltic Sea to 2000 2003 2006 2009 2012 2015 2018 2021 2024 Germany. Nord Stream 2’s total length will be 1,800 km, Source:IGU running through Russian, Finnish, Swedish, Danish and German waters. The operator, Gazprom, is still waiting IGU says replacing more polluting fuels like coal and for the go-ahead to lay the line through Danish waters. oil by gas reduces the emission volume and costs. It Putin also reiterated Moscow’s position that US cited the example of New York City, which converted opposition to the pipeline is commercial not political, 30% of its heavy-fuel-oil burning buildings to natural suggesting Washington saw Nord Stream 2 as a threat gas and cut sulphur oxide emissions by 69% in four to US LNG. US lawmakers are due to decide whether to years. Similarly, banning lignite in Istanbul and gradually impose sanctions on companies and individuals involved replacing it with natural gas for residential heating cut in Nord Stream 2’s development. sulphur oxide emissions by 98% in under a decade.

LNG CONDENSED | NATURALGASWORLD.COM 35 NEWS: GLOBAL LNG

The report says globally almost a billion people have Those eight produced 795.18bn m³ in 2017, according no access to electricity, while global primary energy to Cedigaz, of which 67.28bn m³ were reinjected and demand is expected to double by 2070. Gas-fired power about 100bn m³ were flared or lost in the pipelines, plants can be built twice as fast as coal and nuclear leaving marketed production at 624.4bn m³. plants, cost less to build and are cheaper to maintain. Investing on energy efficiency is also another way to cut emissions: the average American home consumes 40% less natural gas than it did 40 years ago. UK MAJOR BP PUBLISHES FOB LNG TERMSHEET

MIDDLE EAST GAS OUTPUT TO UK major BP has become the first major oil and gas business to publish its free-on-board (FOB) master sale and EXCEED RUSSIA: RYSTAD purchase agreement template for LNG transactions, it said August 14. The document allows either party to buy or sell The Middle East is cruising into the second half of 2019 physical LNG cargoes on a free on-board basis, meaning with spectacular gas production, and is expected to that the buyer has to arrange transport, insurance, storage surpass powerhouse Russia by the end of the year, and any other requisites for handing the LNG from the point according to research by Rystad Energy August 16. of delivery, typically the jetty at the liquefaction terminal. It sees Russian output rising as more LNG plants BP said it has developed the FOB MSA to be “both a come on line, fed by new reserves in the Yamal and balanced and fair transaction route” for either side of the Gydan peninsulas; but this is offset somewhat by transaction and follows its earlier MSP agreement for declining output from the giants, Yamburg and Urengoi. delivery ex-ship. The overall result is a flat line more or less until late next Both publications are aimed at informing the decade, at around 700bn m³/yr. broader discussion around standardisation and liquidity However, the Middle East will produce over 730bn in LNG markets. m³ in 2020, increasing to about 920bn m³ in 2030, the BP’s head of LNG supply and trade Jonty Shepard consultancy forecasts. said that the DES PSA “helped simplify industry Nevertheless, international markets may not feel processes. We hope the publication of the FOB MSA the full effect as demand in the region is also expected will build on that momentum as the LNG industry looks to see rapid growth. Iran and Saudi Arabia alone could for opportunities to drive greater standardisation.” absorb more than half the region’s production by 2030. Qatar will remain the biggest gas exporter in the region and will see a jump in LNG exports as the North Field project ramps up. Exports from Israel are also expected to grow rapidly which could primarily benefit QUEENSLAND CRITICIZES OZ the European market, it said. The region’s gas production growth will depend on a GAS RESERVATION PLANS number of uncertain, mostly political, factors, according to a new book published by the Oxford Institute of The Queensland government has criticized Australian federal Energy Studies. These include the willingness of government plans to create a national gas reservation governments to reward production from challengingly scheme and demanded consultation, it said August 6. tight or sour reservoirs and the extent to which gas can Queensland energy minister Anthony Lynham said replace oil in order to free oil up for export. that as it was the leading state on gas policy and supply The Future of Gas in the Gulf: Continuity and Change for the east coast gas market, the state government comprises reports on eight countries – Qatar, Iran, deserved to be part of any discussions about major Oman, Saudi Arabia, United Arab Emirates, Kuwait, market disruptions. Iraq and Bahrain – and sees the region as a hotspot for “We are deeply concerned that this meddling, which gas demand and supply growth. Three of the countries is not relevant to Queensland, may impact on our multi- will rely on gas to achieve their nationally determined billion dollar gas industry that Labor governments have contributions under the COP 21 Paris Agreement. built here from scratch,” Lynham said.

LNG CONDENSED | NATURALGASWORLD.COM 36 NEWS: GLOBAL LNG

The Australian government August 6 said it would the second largest region, accounting for 23% of the total consider options to establish a prospective national growth. Outside the US, unconventional development will gas reservation scheme to boost supplies in the be slow and concentrated in a few countries, with the domestic market. This was part of a joint media release largest growth expected in China, Canada and Argentina. by treasurer Josh Frydenberg, minister for energy In Europe, by contrast, the long term growth of and emissions reduction, Angus Taylor and resources natural gas demand is uncertain and peak annual gas minister Matthew Canavan. demand could be reached as soon as the middle of the “Queensland has long been doing the heavy lifting next decade, owing to decarbonisation policies. on gas policy and supply. We supply about 25% of the The future expansion of natural gas in the energy east coast gas market and have been leading policy mix is driven by the competitiveness and abundance innovation by setting aside land for gas for domestic of gas resources in gas-rich markets such as North buyers, and for manufacturers. More gas is the key America, Russia, the Middle East and Mozambique. to meeting demand, and that’s what our policies are Unconventional gas, especially in the US, and LNG will driving,” Lynham added. continue to reshape natural gas supplies, Cedigaz says. Australia’s LNG exports from Queensland projects As the energy transition to a sustainable energy have surged in the past few years as prices in the East system accelerates, natural gas demand growth slows Australian market have gone up. The government has strongly after 2025 to 1.1%/year over the 15-year period, been under significant pressure from the manufacturing with 2%/year over 2017-2025. In absolute terms, natural sector to rein in prices and boost domestic supplies. gas demand records a volumetric gain of 1.442 trillion Two years ago, it introduced the Australian Domestic m³ over 2017-2040, accounting for 35% of the global Gas Security Mechanism. Under this mechanism, the energy demand growth. government every year assesses whether LNG exports Industry (mainly petrochemicals and manufacturing) from Queensland need to be restricted. Till now the and power generation account for respectively 44% government has not restricted exports. and 40% of the global gas demand growth, with the “Our domestic supply policy allows for more gas to largest contribution to the growth of gas-fired power be brought to market, and more gas from more fields generation coming from China, the Middle East and the is the only long-term way to deal with supply issue and US. Growth in the industrial sector is the strongest in ultimately with price,” Lynham said. “The LNP federal China, the Middle East, the Americas (excluding Canada) government has never consulted Queensland on its and southeast Asia. domestic gas security mechanism and we remain in the Considering a robust outlook for gas demand in dark on whatever is planned next.” China based on official announcements, China’s LNG demand could quadruple to around 200bn m³ by 2040, representing a quarter of the global LNG market. LNG supply will alter towards a declining market share of Asia-Oceania and the Middle East, while the US steadily CEDIGAZ SEES BRIGHT FUTURE expands its supplier position. Post-2025, Qatar and the US have the potential FOR GAS to become the two leading LNG exporters, each representing a LNG market share of more than 20%. French consultancy Cedigaz sees gas playing a “crucial Mozambique, Russia, and to a lesser extent, Canada, role” in supporting the energy transition out to 2040, will also provide a growing contribution to global LNG according to its outlook for gas published August 5. This supply. LNG market should remain well-supplied until will be enabled by an acceleration in LNG trade – another at least the middle of the next decade assuming likely trend that has been common to many energy outlooks additional FIDs (including Qatar’s expansion project) in published in the last year or so. Natural gas demand grows the near future. In case of project delays, some supply by 40% from 2017 to 2040, with Asia leading the way. shortfalls could occur over the 2023-2024 period. However, Cedigaz says greater use of gas will not be As of August 2019, it is estimated that only 10mn enough to achieve the United Nations’ +2 °C target metric tons/yr of new LNG capacity, in addition to for global warming: emissions in the Cedigaz scenario current operating and post-FID projects, are required to would put the world closer to a +3 °C path. meet international LNG demand in 2025. But thereafter, China accounts for one-third of the incremental gas this supply gap grows rapidly to 75mn mt/yr in 2030; demand over the outlook period and the Middle East is 140mn mt/yr in 2035; and almost 200mn mt/yr in 2040.

LNG CONDENSED | NATURALGASWORLD.COM 37 NEWS: LNG SUPPLY

US LNG EXPORTS UP 51% YOY IN JULY: KPLER

US LNG exports reached 3.16 In 1H2019 two new liquefaction Texas in June. Total US LNG export mt in July, an increase of 51.2% trains came online: Cameron capacity currently stands at 5.4bn year-to-year, data intelligence LNG Train 1 in Louisiana in May f3/day across four facilities and nine fi rm Kpler told NGW. and Corpus Christi LNG Train 2 in liquefaction trains. Kpler analysts expect volumes to dip slightly in August, as US monthly LNG exports by origin installations (mt) several trains have been offl ine for 3.5 maintenance during the month, 2016 2017 2018 2019 with the 22.5mn mt/yr Sabine Pass LNG terminal reduced to 66% of 3 Sabine Pass production capacity. Cove Point According to statistics released 2.5 Corpus Christi by the Energy Information Cameron (Liqu.) Administration (EIA) on August 19, 2 Freeport natural gas deliveries to US facilities that export LNG set a monthly record in July 2019, averaging 6bn f3/day 1.5 (5bn m3/month) or 7% of total US dry natural gas production. 1 The report says pipe gas deliveries to Mexico and to LNG export 0.5 terminals reached 10.9bn f3/day in

July and averaged 10bn f3/day in the 0 fi rst seven months of this year, 30% J M M J S N J M M J S N J M M J S N J M M J more than in the same period of 2018. Source:Kpler

to 12.88mn mt/year of LNG. A final investment US EXIM MULLS $5BN LOAN TO decision (FID) on the $20bn scheme was taken in June. Occidental entered the project through its MOZAMBIQUE LNG takeover of fellow Texas operator Anadarko Petroleum in August. The board of directors at the US Export-Import Bank According to Exim, potential US goods and services (Exim) plans to vote on whether to issue a $5bn direct to Mozambique LNG are “facing direct competition from loan to the Mozambique LNG project, led by Texas- fi nancing offered by foreign export credit agencies.” It based Occidental Petroleum. If approved, it would mark estimated that its loan would create 16,400 US jobs the bank’s biggest export fi nancing deal in years. over a fi ve-year construction period and earn more than Exim announced on August 22 it had notifi ed US $600mn in interest and fees. Congress of its proposal to support the supply of US Exim regained its full lending powers in May after goods and services for the construction of the LNG having them curtailed for almost four years amid export terminal on the Afungi Peninsula in northern Republican opposition in Congress. During that time Mozambique. The bank’s board will be able to take a it could only provide loans and guarantees worth fi nal vote on the loan in 35 days. up to $10mn. Congress is set to decide whether Mozambique LNG aims to exploit offshore gas to renew the bank’s charter, which expires on resources in the Rovuma basin to produce up September 30.

LNG CONDENSED | NATURALGASWORLD.COM 38 NEWS: LNG SUPPLY

the world. The closing of our financing is the culmination COMMONWEALTH LNG of years of hard work, and we want to sincerely thank our Venture Global team, our construction partners, our CONFIRMS FERC APPLICATION foundation customers, our lenders and advisors, Cameron Parish and our local partners in Louisiana.” Commonwealth LNG confirmed August 21 it had Calcasieu Pass has received all necessary permits, filed a formal application with the US Federal Energy including Federal Energy Regulatory Commission Regulatory Commission (Ferc) for its proposed 8.4mn approval and Non-Free Trade Agreement export mt/yr liquefaction and export terminal on the Calcasieu authorisation from the Department of Energy. The Ship Channel in Louisiana. project has 20-year LNG sale and purchase agreements The application was filed August 20 and entered a with Shell, BP, Edison, Galp, Repsol and PGNiG. 10-day waiting period for formal acceptance by Ferc, at Venture Global LNG is also developing the 20mn mt/ which time the project will be assigned a docket number yr Plaquemines LNG project and the 20mn mt/yr Delta and Commonwealth will issue a formal statement, a LNG project, both in Plaquemines Parish, Louisiana. spokesman told NGW. The estimated $4bn project consists of six 1.4mn mt/ yr liquefaction trains, six modular storage tanks each with the capacity to hold 40,000 m3 of LNG and a three- mile pipeline connecting the liquefaction facility to two US FREEPORT TESTS LNG TRAIN nearby interstate pipeline systems. Commonwealth LNG has been in the pre-filing stage at Ferc since 3Q 2017. The Texas Freeport LNG project has achieved sustained Heads of agreement have been signed covering up to LNG production at the first of its four planned 5.10mn 4mn mt/yr of output, Commonwealth told NGW earlier this mt/yr liquefaction train, offtaker Jera said August 20. year. A final investment decision is contemplated in 1Q 2021 First LNG production was August 12, although it was and commercial operations are expected to begin in 1Q 2024. originally planned for last year. The first deliveries come at a time of very low gas prices worldwide, but the offtakers have tolling agreements which mean they can decide when to liquefy gas for export. Osaka Gas and Jera each own 25% of the project VENTURE GLOBAL REVEALS through FLNG Liquefaction and the two are aiming for commercial operation in the fall of 2019. The other FID FOR CALCASIEU PASS LNG half of the project is owned by Freeport. The two firms each have 20-year agreements for Venture Global LNG, which early August 19 announced it 2.32mn mt/yr of LNG, delivered free on board and free had closed project financing for its Calcasieu Pass LNG from destination restrictions. They are responsible for facility and associated TransCameron pipeline, updated sourcing their own gas, from the US market. Trafigura that milestone by issuing a second release announcing has a three-year agreement for 0.5mn mt/yr. a positive final investment decision for the 10mn mt/yr A final investment decision on Train 1 was taken in liquefaction terminal and pipeline. October 2014. The project operator is Freeport LNG The proceeds of the debt and equity financing Development. Osaka Gas and Jera say that they have, announced previously will fully fund the balance of the by participating in the project, contributed to its start- construction and commissioning of Calcasieu Pass, up, and intend to use the experience gained through where full site construction has been underway since operation of the project to expand their LNG businesses. February 2019. The project is expected to reach its Freeport LNG had been an LNG import terminal. commercial operations date at some point in 2022. In a separate announcement, McDermott Stonepeak Infrastructure Partners provided a $1.3bn International, part of the engineering, procurement equity investment for the project in May. The lender and construction (EPC) joint venture that includes group for the company’s $5.8bn construction financing Chiyoda International and Zachry Group, said Train 2 comprises North American, European and Asian banks. remains on track for initial LNG production in 4Q 2019 Venture Global LNG co-CEOs Mike Sabel and Bob while Train 3 is on track for initial production in 1Q Pender said the company’s goal had “always been to lower 2020. A fourth train, also about 5mn mt/yr, is awaiting the cost of electricity by delivering clean, low-cost LNG to regulatory approval.

LNG CONDENSED | NATURALGASWORLD.COM 39 NEWS: LNG SUPPLY

delays to the finalisation of the P’nyang gas agreement CAMERON LNG REACHES are on the cards. The Papua LNG project will encompass two LNG COMMERCIAL LAUNCH trains of 2.7mn mt/yr each and will be developed together with the existing PNG LNG project facilities, The first 4mn mt/yr train of the Cameron LNG export operated by US major ExxonMobil. terminal in Louisiana has launched commercial operations, its US-based developer Sempra Energy reported August 19. The train’s launch was initially scheduled for early 2018, but the milestone was delayed because of BC LNG FOE TAKES AIM problems with construction. Its full-scale start-up was approved by the US Federal Energy Regulation AT KITIMAT LNG EXPORT Commission (Ferc) in late July. “This is an exciting moment for Cameron LNG APPLICATION and for Sempra Energy,” Carlos Ruiz Sacristan, CEO of Sempra North American Infrastructure, said in Michael Sawyer, the BC environmental activist and a statement. “Cameron LNG is exporting LNG to federal Green Party candidate who tried unsuccessfully customers in the largest world markets, helping to to force TC Energy’s Coastal GasLink pipeline into support economic growth in the US and abroad.” the federal regulatory sphere, has taken aim at an At full capacity, Cameron LNG will consist of three trains application by Chevron Canada for a 40-year natural with a combined output of 12mn mt/yr, providing Sempra gas export licence to support its proposed 18mn mt/yr with $400-450mn in annual earnings. Sempra has a 50.2% Kitimat LNG project. stake in the project, joined by France’s Total, Japan’s Mitsui In an August 9 filing with Canada’s National Energy & Co and Japan LNG Investment, a joint venture between Board (NEB), Sawyer disputes Chevron’s assertions that Mitsubishi and Nippon Yusen Kabushiki Kaisha. gas supply for its Kitimat LNG project will be surplus to Canada’s needs over the 40-year life of the licence, and is asking that the board deny the application “in its entirety.”

PNG TEAM MOVES TO RENEGOTIATE GAS DEAL WITH OZ SHIPS RECORD LNG IN JULY

TOTAL Australian LNG shipments in July were a record 7mn metric tons (102 cargoes), up from 6.2mn mt (90 A team representing the Papua New Guinea cargoes) in June, thanks to Pluto coming back on government left in August for Singapore to renegotiate production after a month-long maintenance shutdown, the Papua LNG gas agreement, which was signed by advisory firm EnergyQuest said in its monthly LNG the previous PNG government and the French Total-led report August 14. PRL 15 joint venture in April 2019, PNG energy minister July shipments were a record 82.8mn mt/yr on an Kerenga Kua said August 15 in a statement. annualised basis, well ahead of Qatar’s nameplate The minister said that people’s expectations must capacity of 77mn mt/yr. Average capacity utilisation was be guarded at this moment and the “negotiations could up in July due to Pluto coming online and more cargoes work out well or even disastrous, but either way, people from Gorgon and Wheatstone, EnergyQuest said. Shell’s must be ready to accept whatever the outcome.” Kua’s Prelude project continues to increase production after tone was sharply different from earlier in the month when its first cargo was shipped in mid-June. he announced that the PNG government had agreed “in Australian production in financial year 2020 (July principle” to support the deal. The deal was put up for review 2019-June 2020) is likely to surpass Qatar when after the prime minister who signed it resigned in May. EnergyQuest expects production to be around 80mn Kua’s latest comments have once again raised doubts mt, boosted by a full year of production from Ichthys and about the status of the Papua LNG agreement. Further Prelude floating LNG project.

LNG CONDENSED | NATURALGASWORLD.COM 40 NEWS: LNG DEMAND

Pradesh by 2022, Press Trust of India reported its INDIA’S GAS OUTPUT TO chairman D Rajkumar as saying August 26. BPCL will hold 74% interest in the project while the INCREASE 20% BY 2020-2021 remaining 26% will be held by Petronet LNG, he said. The terminal will have an initial capacity of 1mn mt/year, India’s gas production is expected to rise to 39.3bn m3 in which can be scaled up to 3mn mt/yr or 5mn mt/yr in 2020-2021 (April-March) from 32.87bn m3 in 2018-2019, future, Rajkumar said. an increase of almost 20%, the country’s petroleum and BPCL has made a foray into city gas distribution natural gas minister Dharmendra Pradhan said during an (CGD) and is now looking to set up an LNG import event in New Delhi August 26. terminal of its own. Rajkumar said. The company is The share of gas in India’s energy mix is 6.2% transferring its gas business to a new subsidiary, Bharat compared with 24% globally, and the aim is to increase Gas Resources (BGRL). share to 15% by 2030, he said. Despite the expected rise in domestic gas production, India will need to import significant volumes of LNG to meet domestic demand. According to Pradhan, India’s LNG import and CHINA’S JULY LNG regasification capacity of 38.8mn mt/year will be augmented to 52.5mn mt/yr in the next three to four IMPORTS UP 18% years. Long-term contracts have been signed for importing LNG, and its sources are being diversified, the China imported 4.88mn metric tons of LNG in July, minister said. up 18.1% yr/yr, customs department’s data published India is focusing on expanding the reach of its city August 23 showed. gas distribution (CGD) network. Pradhan said that in the Month on month, imports rose by 7.7%. During the last five years, the number of domestic piped natural first seven months of the year, China imported 33.18mn gas (PNG) connections, CNG vehicles and CNG stations mt of LNG, representing an 18.8% increase yr/yr. have more than doubled. He said that India is the If the current trend continues, Asia’s biggest world’s third largest energy consumer, and will become economy will end up with another record year in terms the top consumer in a decade. He expects CNG’s share of LNG imports. Last year, the country imported a of the energy miz to rise fastest. record 54mn mt of LNG. In the last year, India has successfully concluded the ninth and the 10th CGD bidding rounds. After the completion of the 10th round, over 70% of the country’s population and 52.73% of the area will be covered under the CGD network, Pradhan said. CHINESE WIN CYPRIOT FSRU TENDER

A Chinese-led consortium has been selected as the BPCL TO INVEST OVER preferred contractor to supply a floating storage and regasification unit (FSRU) for an LNG terminal in Cyprus. $200MN IN EAST INDIA The group consisting of Chinese state entities China Petroleum Pipeline Engineering (CPP) and Hudong- TERMINAL: PRESS Zhonghua Shipbuilding, Greek firms Aktor and Metron and Norway’s Wilhelmsen Ship Management, outbid two other Indian state-owned Bharat Petroleum Corporation consortia backed by South Korean and Japanese firms, (BPCL) plans to invest rupees 15bn-17bn ($210mn- Cyprus’ state-owned Natural Gas Public Co. (Defa) reported $240mn) in building a floating LNG import terminal at August 23. The companies involved will be invited to Krishnapatnam in the eastern Indian state of Andhra Nicosia to start contract talks as soon as possible, it said.

LNG CONDENSED | NATURALGASWORLD.COM 41 NEWS: LNG DEMAND

This is Cyprus’ fourth attempt at advancing an LNG import project. Defa launched the latest FSRU AG&P, CHART INDUSTRIES tender last year, but had to extend the deadline several times so that companies had time to put SIGN LNG MOU together proposals. The closing date for bids finally came on July 12. The delays have cast doubt on Manila-based Atlantic Gulf & Pacific Company (AG&P) whether the facility will be ready to operate in 2021 has entered into a memorandum of understanding as planned. (MoU) with US-based Chart Industries to develop small- The project, priced at €250mn ($278mn), will also scale LNG infrastructure, it said August 23. include a jetty for mooring the FSRU, a jetty-borne gas “Under the MoU, both companies will develop small- pipeline and related infrastructure. scale LNG infrastructure to serve the growing number of countries seeking to import and distribute natural gas. AG&P and Chart will serve the emerging markets’ increasing demand for LNG as a cleaner and cheaper alternative energy source for power generation, shipping GERMANY SPEARHEADS fuel, ground transport and industrial use,” AG&P said. The two companies will look to offer LNG EUROPEAN LNG SPENDING applications and logistics solutions to provide easier and more affordable access to gas for new and under-served New-comer to the LNG market Germany will drive customers. growth in Europe’s LNG import capacity in the years The alliance will also support AG&P’s city gas 2019 to 2023, according to research published August distribution business in India where AG&P has won 14 by GlobalData. Two terminals are planned which will long-term, exclusive concessions in 28 districts across contribute around 31% of Europe’s total growth, it said. four states in South India and Rajasthan to supply The company’s report shows that Germany, which compressed natural gas (CNG) to vehicles and piped currently has no LNG import capacity, is expected to natural gas (PNG) to homes, industries and businesses, have new-build regasification capacity of 635bn ft³/yr AG&P said. (18bn m³/yr) by 2023. The MoU covers the design and development of GlobalData analyst Dipayan Chakraborty LNG storage solutions; LNG regasification applications; said Wilhelmshaven Floating LNG and Brunsbuttel modular liquefaction and regasification; LNG bunkering are the two upcoming announced regasification for marine vessels; LNG and CNG vehicle fuelling terminals in Germany during the 2019 to 2023 period. stations; LNG fuelled vehicle tanks; LNG micro Both are expected to start operations in 2022, bulk systems and other alternative LNG mobile with Wilhelmshaven expected to add the highest transportation, such as railcars and ISO containers. regasification capacity of 353bn ft³/yr by 2023. However, final investment decisions have not yet been taken on either project, but both have customers prepared in principle to help finance the construction with advance bookings. INDIA’S JULY LNG At Wilhelmshaven, the project’s initiator Uniper has started an open season, but has already lined up IMPORTS UP 9% ExxonMobil for a significant chunk of the capacity. However, Uniper is not planning to operate the terminal India’s LNG imports in July increased year-on-year for in the long-term. That will be Mitsui OSK Lines’ role, the fourth month in a row, according to data published subject to the final investment decision. August 22 by Indian oil and gas ministry’s Petroleum Following Germany, GlobalData identifies Spain as Planning and Analysis Cell (PPAC). the second largest country in terms of regasification In June, India imported LNG equivalent to 2.73bn capacity growth in Europe, although it already has the m³ of pipeline gas (about 2mn metric tons), up 9.1%, most terminals. It will add 339bn ft³/yr by 2023. Spain’s compared with the same month of the previous year. El Musel terminal is expected to have the highest During the first four months of this financial year, capacity among planned and announced terminals with cumulative imports were 10.65bn m³, up 6.6% year-on- 247bn ft³/yr of capacity by 2023. year. India’s financial year runs from April to March.

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During the last financial year, India imported 27bn m³ Petroleum, Noble Energy, Marathon Oil, Glencore and of LNG, up 2.6% compared with the year before. This Gunvor are investing close to $350mn on pooling supply was the highest ever volume in one fiscal year. from stranded gas fields in Equatorial Guinea and the Gulf of Guinea to replace declining output from the Alba field, which feeds the LNG terminal.

WEST AFRICAN EXPORTER BUILDS LNG IMPORT CAPACITY EPIK’S OZ IMPORT TERMINAL

Equatorial Guinea has inaugurated the first LNG storage GIVEN ‘CRITICAL’ STATUS and regasification plant to be built on the west African coast, according to a statement distributed by APO Australia’s New South Wales (NSW) government August 20. August 14 declared South Korean LNG developer Equatorial Guinea already produces LNG Epik’s proposed Newcastle Gas Dock LNG import for export at one facility on Bioko Island and is project as ‘critical state significant infrastructure’ reportedly trying to reboot Fortuna LNG – a failed (CSSI). While the CSSI designation is not an approval floating LNG project aimed at recovering large for the project, it is a framework which sets out a clear reserves of stranded gas – now that the licence has approval pathway. reverted to the government. “The terminal could be operational by 2022-23 and The new plant is being built at the Port of Akonikien provide supply for gas-fired power stations, helping on Equatorial Guinea’s mainland by local contractor Elite to manage energy security during the period in which Construcciones. With a storage capacity of 14,000 m³ the Liddell power station is scheduled to close,” acting in 12 bullet tanks, it is the first of its kind and allows premier John Barilaro said in a statement. LNG to be distributed on the mainland. Along with the Epik plans to build a 170,000 m³ floating storage storage and regasification infrastructure, Elite is also and regasification unit (FSRU) capable of covering over installing a truck loading station and 12 km of gas and 80% of gas demand in NSW – a project earmarked to diesel pipelines. cost US$400-430mn. In April, it recruited Australia’s Equatorial Guinea’s hydrocarbon minister Gabriel Watpac to design, engineer and construct the onshore Mbaga Obiang Lima said the terminal was part of the infrastructure. It also hopes to leverage its strategic privately-run LNG2Africa initiative. “LNG2Africa has a pact with South Korea’s Hyundai LNG Shipping to help clear objective of developing small-scale LNG projects realise the venture. to supply gas to countries and regions with limited The project was declared CSSI by planning and public infrastructure. At a time when Africa’s large-scale LNG spaces minister Rob Stokes who said the terminal, if projects are making headlines, let’s remind ourselves approved, would significantly increase local gas supply, that smaller-scale projects addressing the needs of promote competition between suppliers and put energy-deficient regions provide opportunities to downward pressure on the state’s gas prices. monetise our gas for our economies, and to mobilise “NSW currently relies on interstate sources for our local companies around key infrastructure projects 95% of our gas supply and experts predict a shortfall for the region,” he said. in supply from existing sources in the coming years,” Gas will be transported by trucks and pipelines to Stokes said. various energy-intensive industries such as power The terminal will still be subject to detailed generation and cement-making. community consultation and a full and thorough The world’s largest factory-built cryogenic bullet environmental assessment, the government said. tanks have been built by US Corban Energy Group. Newcastle GasDock Company (NGDC), will now need Elite Construcciones also worked closely with German to prepare an environmental impact statement for the companies Noordtec and ESC on the design and project, which will go on public exhibition for community construction of the plant. feedback. The department of planning, industry and In April of this year, Equatorial Guinea signed the environment will then assess the merits of the project, definitive agreements for the monetisation of gas from before making a recommendation to minister Stokes for its Alen Unit¯‑n. Under the agreements, Atlas Oranto a final decision, the government said.

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This is the second LNG import terminal project in the “The concentration of Australian LNG trade in North state to get the CSSI tag. Last year, Australian Industrial Asia is both a strength and weakness. A strength as Energy (AIE) consortium’s proposed Port Kembla North Asia is the world’s largest and fastest growing terminal was declared critical. LNG market. A weakness from lack of diversifi cation and the risks this involves,” EnergyQuest said. South Korea bought 10% of total Australian LNG exports in FY2019. JAPAN LARGEST IMPORTER OF AUSTRALIAN LNG CNOOC MOVES AHEAD Japan was the largest buyer of Australian LNG during the 12-months to June (FY2019), but China is closing the WITH TIANJIN TERMINAL gap, advisory fi rm EnergyQuest said in its monthly LNG report published August 14. SECOND PHASE Australia exported 29.5mn metric tons of LNG to Japan in FY2019 (39% of total exports) while exports to China Cnooc Gas and Power has approved the feasibility stood at 27.2mn mt (36% of total exports), EnergyQuest report relating to the development of the second phase said. 95% of Japanese imports from Australia come from of its Tianjin LNG receiving terminal, the company said Western Australia or the Northern Territory. July 26. Japan’s LNG imports in July stood at 6.82mn metric In the second phase, Cnooc Gas and Power, a tons, up just 0.1% year-on-year, according to the unit of state-owned Cnooc, will build six tanks of

3 NNING provisional data released by country’s fi nance ministry 220,000 m and related processing facilities, external Ø August 19. pipelines and supporting external power access and Australia also supplied 46% of Chinese LNG in water intake and drainage systems. This phase is FY2019 and remains the biggest supplier to China, expected to be ready by 2022, Cnooc Gas and Power EnergyQuest said. 57% of Australian LNG exports said. to China in FY2019 came from Queensland. Chinese Cnooc Gas and Power operates nine LNG import companies have made huge investments in Queensland terminals at Tianjin, Shanghai, Ningbo, Putian, Yuedong, LNG and Queensland alone supplied a massive 27% of Dapeng, Zhuhai, Hainan and Shenzhen. The company

all China’s LNG imports, according to EnergyQuest. has started work on its 10th terminal. PHOTO: FLICKR.COM/TORBEN R

LNG CONDENSED | NATURALGASWORLD.COM 44 NEWS: LNG CORPORATE

longer be associated with PLL and we wish him best in SHELL PURSUES AUSTRALIAN his future endeavours. Mr Yousaf brings a vast and rich experience of [the] LNG / gas sector to lead and grow I&C POWER CUSTOMERS the operations of PLL,” the company tweeted. According to Pakistani media reports the board of Anglo-Dutch major Shell has agreed to buy Australian directors of PLL accepted Gilani’s resignation August utility ERM Power, the country’s second largest by 22 with immediate effect. The board had called an load, for A$617mn ($415mn) less dividend adjustments emergency meeting after prime minister Imran Khan payable by ERM, it said August 22. took notice in the wake of anti-corruption watchdog’s ERM Power has a gas-only fleet and only sells to probe into his appointment, The Express tribune business customers. As such Shell will likely avoid the reported August 23. PPL has however denied that Gilani political spotlight under which the retail utilities have had been replaced due to any graft investigation. been operating recently given blackouts and rising Pakistan’s LNG sector has been mired in controversy prices, said Wood Mackenzie in a comment. due to allegations of corruption surrounding an LNG It further said that Shell will likely supply ERM Power’s deal with Qatar. In July, ex-prime minister of Pakistan Oakey Power Station in Queensland with gas from its Shahid Khaqan Abbasi was arrested by the National Queensland Curtis LNG project: it can arbitrage between Accountability Bureau (NAB). He was charged in a multi- exports and domestic supply. “Domestic prices are relatively billion-rupee case, relating to the award of a Qatari LNG attractive currently. The massive scale of the Queensland import contract. Earlier in August, NAB arrested ex-finance Curtis resource means that Shell can significantly increase minister of Pakistan Miftah Ismail in the same case. its gas supply to ERM Power in future,” it said. Pakistan State Oil and Qatargas signed in 2016 a Shell said: “This acquisition aligns with Shell’s global 15-year sale and purchase agreement for 3.76mn mt/yr ambition to expand our integrated power business and indexed to the price of Brent oil. builds on Shell Energy Australia’s existing gas marketing and trading capability. ERM will become our core power and energy solutions platform and this acquisition is a significant step forward in growing Shell’s integrated power business in Australia. Upon completion, we look forward to NOVATEK BOARD PROPOSES H1 welcoming ERM’s staff and customers to Shell.” Earlier this year Shell began trading and selling DIVIDENDS electricity to businesses in Japan. The company also owns First Utility in the UK and is hoping to buy a The board of Russia’s largest LNG exporter Novatek Dutch utility, giving it another outlet for its global has proposed paying out rubles 43.2bn ($655mn) of its gas production and LNG trade, and to capture more first-half profits in dividends, the company said in a stock downstream value at a time of oversupply. exchange filing on August 23. The acquisition has received regulatory approval, but The payout equates to rubles 14.23 per ordinary still needs court approval as well as ERM shareholder share or rubles 142.3 per global depository receipt approval. The takeover is expected to be completed (GDR), and amounts to 9.6% of Novatek’s net income in before the end of 2019. the six-month period, which came in at rubles 451bn. In contrast, Novatek issued rubles 28bn in interim dividends last year, or 37% of its profit of rubles 75.2bn. The company’s dividend policy will be discussed at an extraordinary meeting of shareholders on September 30. PAKISTAN LNG REPLACES CEO Novatek’s earnings have risen dramatically this year thanks to its Yamal LNG export terminal reaching State-run Pakistan LNG (PLL) has replaced its CEO, the full capacity last December. But it has also hiked company said on Twitter August 24. spending on growth, raising capital expenditure to “PLL informs its stakeholders that Mr. Shahid Yousaf rubles 73.7bn in January through June, from rubles is appointed as CEO and Mr M. Adnan Gilani will no 31.8bn a year earlier.

LNG CONDENSED | NATURALGASWORLD.COM 45 NEWS: LNG CORPORATE

we supplied around 30% of east coast gas demand and HOEGH LNG BOOKS Q2 LOSS entered into gas supply agreements with a number of domestic manufacturing customers, supporting local Norwegian floating storage and regasification (FSRU) industry and employment,” Origin CEO Frank Calabria said. supplier Hoegh LNG moved to a loss in the second Origin said it has resumed exploration activities in the quarter, blaming the result on seasonal variations and Beetaloo Basin following the lifting of the moratorium dry-docking costs. on onshore gas development last year by the Northern The company reported on August 22 a net loss of Territory government. Over the remainder of 2019, Origin $3.6mn for the three-month period, versus an after-tax intends to drill two horizontal wells and then undertake profit of $7.8mn in the same period of 2018. Total income extended flow testing of both liquids and gas in 2020. was relatively stable at $75.5mn, down from $75.8mn a year earlier. “Hoegh LNG’s results for Q219 are negatively affected by seasonal variations and dry docking costs,” CEO Sveinung Stohle explained. “Adjusted for these effects, AUSTRALIA’S SANTOS H1 our underlying numbers are in line with previous quarters.” Reflecting on the path forward, Stohle noted that the UNDERLYING PROFIT UP 89% LNG market was continuing its rapid expansion, growing by 16% in the first half, owing to the ongoing transition from Australian Santos August 22 said its underlying profit coal to gas in the power sector, as well as ample supply. during the six months to June (H1 2019) jumped 89% year “This is further reflected by the important progress being on year to US$411mn owing to the successful acquisition made on all FSRU projects where the company is already of Quadrant Energy last year and higher LNG prices. selected as the FSRU provider or has won exclusivity, he “Today’s announcement of half-year results said predicting that Hoegh’s entire FSRU fleet would be demonstrates the strength of our cash-generative engaged under long-term contracts by the end of 2021. operating model and the successful integration of the Hoegh struck new charter deals for its Galleon and Quadrant acquisition,” Santos CEO Kevin Gallagher said. Esperanza units during the quarter, and is finishing The CEO stated that the company is increasing up construction of its Gallant vessel. It also entered guidance on combination synergies resulting from the “exclusivity” talks for the supply of an FSRU to Australian Quadrant deal to between US$50-$60mn/year from Industrial Energy’s Port Kembla gas terminal project, US$30-50mn/yr announced earlier. Santos completed where a final investment decision (FID) is anticipated this the US$2.15bn acquisition of a smaller Australian year, along with a second for an unnamed Asian project, producer Quadrant Energy in November last year. where the charterer is currently acquiring permits. Production was up 32% year on year to 37mn barrels of Hoegh is looking to branch out into the market for oil equivalent, mainly due to the resumption of full production smaller LNG projects in a bid to diversify. It has six in Papau New Guinea following the impact of the earthquake small-scale LNG carriers with bunkering capabilities and the inclusion of Quadrant Energy. This was partly offset under construction, due to deliver in 2019-2021. by the sale of the Asian assets in September 2018, Santos said. The company has maintained 2019 full-year production guidance at 73-77mn boe. Its average realised LNG price was up 11% year on year at US$9.97/mn Btu. Santos said it would be supplying more than 70 AUSTRALIA’S ORIGIN REPORTS petajoules of gas to the Australian east coast market in 2019; approximately 14% of demand. The company is RISE IN UNDERLYING PROFIT supportive of a prospective gas reservation scheme that is complementary to a robust LNG export framework, it said. Australian gas and energy retailer Origin Energy August 22 Santos added that its LNG portfolio is well positioned reported a 41.6% year on year increase in underlying profit with strong long-term contracts and brownfield backfill for the 12-months to June (FY 2019). Underlying profit for and expansion opportunities at Darwin LNG and PNG the year was A$1.03bn as against A$726mn in the prior year. LNG. Gladstone LNG is on track to meet about 6mn “Integrated Gas benefited from higher commodity metric tons/year annualised sales run-rate, including prices, cost efficiencies and continued reliable production LNG volumes redirected to the domestic market by the at Australia Pacific LNG. Through Australia Pacific LNG end of 2019, it said.

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for refurbishment in Singapore ahead of its restart at OZ OIL SEARCH DOUBLES H1 Greater Enfield,” CEO Peter Coleman said. Pluto LNG delivered 14.2mn boe of production in the PROFIT half (Woodside share). The facility’s first major turnaround since startup in 2012 was completed in Q2 2019 to support Australian oil and gas explorer Oil Search August 20 said continued safe, reliable and efficient production, resulting its net profit during the six months to June (H1 2019) in lower production for the half, the company said. rose 105% year on year owing to higher sales volume According to Woodside, Greater Sunrise production and realised LNG and gas prices. sharing contract negotiations with the governments The company’s net profit in H1 was US$161.9mn as of Timor-Leste and Australia are ongoing. The existing against H1 2018 net profit of US$79.2mn, which was Sunrise titles, including the Australian retention leases impacted by the February 2018 PNG Highlands earthquake, in the Eastern Greater Sunrise offshore area, will Oil Search said. Total sales volume stood at 13.39mn continue to govern operations in the area until such barrels of oil equivalent, up 37% year on year. The average time as a new production sharing contract is agreed, it realised LNG and gas price was US$9.71/mn Btu, up 8% said. The 2018 treaty between Australia and Timor-Leste year on year, the company said. Total revenue during H1 establishing their maritime boundaries in the Timor Sea is was US$776.9mn, an increase of 39% year on year. expected to enter into force in H2 2019, Woodside said. The PNG LNG project produced at an annualised In April, the government of Timor-Leste (East rate of 8.6mn metric tons/year during H1, 25% above Timor) completed the purchase of ConocoPhillips› 30% nameplate capacity. “This was an excellent result given interest and Shell Australia›s 26.56% interest in the the two-week partial shut-in for scheduled maintenance. Greater Sunrise fields, giving Timor Gap, the national oil No further major downtime is planned for 2019,” the company of Timor-Leste, a 56.56% interest in the fields. company said. Woodside operates the undeveloped Greater Sunrise Commenting on the Papua LNG gas agreement, Oil project with a 33.44% interest, while the other non- Search said that “the Papua LNG project joint venture state partner is Japan›s Osaka Gas with 10%. believes that the legally binding agreement, negotiated and signed in good faith, is fair and balanced, equitably allocating project benefits and returns to the state, the project participants and other stakeholders.” FLOWSERVE WINS PRELUDE CONTRACT

AUSTRALIA’S WOODSIDE SEES Flowserve Corporation August 12 said it has entered into a five-year contract with Shell Australia to provide DROP IN H1 PROFIT general maintenance services for the Prelude floating LNG (FLNG) facility. Australian Woodside August 15 reported a decline in net As part of this agreement, Flowserve will profit for the six months to June (H1 2019) as production take care of maintenance and repair services for dropped, owing to an extended maintenance period at centrifugal pumps, positive displacement pumps, heat Pluto LNG and cyclone Veronica. exchangers, fans and blowers, hydraulic power units, Net profit during the aforementioned period was and other related equipment. US$419mn versus US$541mn in the same period of the The Shell-operated Prelude FLNG facility is an previous year. Production during H1 was 39mn barrels offshore development, producing natural gas from a of oil equivalent as against 44.3mn boe in the same remote field approximately 475 km north-northeast of period last year. Revenue during H1 was US$2.26bn the coastal town of Broome in Western Australia. The versus US$2.38bn in H1 of last year. Prelude FLNG facility is scheduled to produce 3.6mn “First half NPAT [net profit after tax] was lower metric tons/year of LNG, 1.3 mn metric tons/year of compared to the corresponding period due to the impact condensate and 0.4mn metric tons/year of LPG . of tropical cyclone Veronica, planned maintenance at The Prelude FLNG facility is operated by Shell in a joint Pluto LNG, and the Ngujima-Yin floating production venture with Inpex Corporation; Korea Gas Corporation; storage and offloading (FPSO) facility being offline and the Overseas Private Investment Corporation.

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“The second quarter was highlighted by continued OXY COMPLETES ANADARKO execution on our growth plans through a positive FID on Train 6 at Sabine Pass, continued commercial innovation PURCHASE with the long-term IPM contract with Apache, and continued financial discipline, reflected in the capital US-focused independent Occidental (Oxy) has completed allocation framework we announced during the quarter,” its acquisition of compatriot Anadarko in a $55bn deal Cheniere CEO Jack Fusco said. “LNG volumes in our plus the assumption of Anadarko’s debt, it said August 8. portfolio, via early completion of trains and excellent “With Anadarko’s world-class asset portfolio now operational performance at both Sabine Pass and officially part of Occidental, we begin our work to integrate Corpus Christi, continue to help offset relative softness our two companies and unlock the significant value of this in short-term LNG market pricing.” combination for shareholders,” said Oxy CEO Vicki Hollub. At Corpus Christi, Train 2 exported its first commissioning “We expect to deliver at least $3.5bn annually in cargo in June and substantial completion is expected in 3Q cost and capital spending synergies and the focus of 2019. Train 3 is listed as 62.4% complete, with substantial our board and management team is on execution to completion expected in the second half of 2021, while achieve the promise of this exciting combination. We Train 6 at Sabine Pass is listed as 32.4% complete, with look forward to updating the market on our continued substantial completion expected in the first half of 2023. progress in the months ahead.” The closing of the transaction follows approval of the transaction by Anadarko’s shareholders at a meeting held earlier in the day, where over 99% of the shares voted in favour. ITALY’S SAIPEM LANDS ARCTIC Anadarko shareholders are receiving $59.00 in cash and 0.2934 shares of Oxy common stock per share of LNG 2 DEAL Anadarko common stock in the transaction. Effective after the end of trading August 8, Anadarko’s common stock Italian engineering firm Saipem is to join Technip France will no longer trade on the New York Stock Exchange. and Russian NIPIgaspererabotka in the Arctic LNG2 Oxy separately agreed to sell all Anadarko’s African project, it said August 2. It won a €2.2 ($2.24)bn contract assets, including the approved Mozambique LNG project from Arctic LNG2, a company formed by Russian that Anadarko operated, to France’s Total. The payment independent Novatek (60%) and its wholly-owned allowed Oxy to increase the cash component and the deal subsidiary Ekropromstroy (40%) and comprises the does not require Oxy shareholders’ approval. Total has not detailed design, procurement, fabrication, construction, so far issued a statement on the completion of that deal. commissioning and start-up of three 6.6mn metric tons/ yr LNG trains built into gravity-based structures (GBS). Saipem is designing and building the GBS – a much cheaper alternative to the technique used in Yamal LNG – in the framework of the contract announced December 19, CHENIERE REPORTS 2018. The contract will be executed under a lump sum and reimbursable basis. INCREASED Q2 LOSS CEO Sefano Cao said that Saipem’s involvement in building the three trains, following the awards of the US LNG developer Cheniere Energy said August 8 its contracts for the GBS with the same client and in the LNG net loss for 2Q 2019 grew to $114mn from $18mn in Mozambique project with Anadarko, reaffirm “Saipem’s the comparable period a year ago, reflecting increased strategic choice to consolidate its leadership across the operating costs and expenses related to new liquefaction entire natural gas value chain.” trains brought into service in the past year. Net income Novatek is expected to announce the final investment in 1H 2019 also fell, to $27mn from $339mn. decision by end-September, but it says it has already taken During the second quarter, 104 LNG cargoes were the decision to proceed “in its head.” exported from Cheniere’s two liquefaction terminals, Norwegian engineers Kvaerner had done three earlier at Sabine Pass in Louisiana and Corpus Christi in Texas, studies for Novatek recommending the cost-saving GBS including one commissioning cargo from Train 2 at idea, as the system used for Yamal LNG, which involved Corpus Christi. Volumes exported increased to 361 trillion sinking thermally-insulated piles into the permafrost, was too Btu from 219 trillion Btu (in 61 cargoes) during 2Q 2018. costly to be repeated. But it lost out on the big contracts.

LNG CONDENSED | NATURALGASWORLD.COM 48 NEWS: LNG IN TRANSPORT

120 metres in length and 21 metres in width, with a LNG-FUELLED TANKER SET TO deadweight tonnage of 7,000. They have a speed of CROSS RUSSIAN ARCTIC around 15 knots.

The Korolev Prospect Aframax vessel will become the first LNG-fuelled oil tanker of its size to cross the entire Northern Sea Route (NSR) through the Russian Arctic, SAMSUNG HEAVY WINS ORDER its Russian state-owned operator Sovcomflot announced on August 26. FOR 10 LNG-FUELLED CRUDE The tanker is transporting a batch of crude oil picked up at Russia’s northwest port of Murmansk to China, CARRIERS Sovcomflot said. The journey should take eight days. The Korolev Prospect will travel at a speed of 12 knots South Korean shipbuilder Samsung Heavy Industries without ice-breaker assistance. has received an order worth won 751.3bn ($621mn) to Sovcomflot now has six LNG-fuelled oil tankers in build 10 LNG-fuelled crude oil carriers, it said August operation, with a further five under construction. Korolev 19. The vessels will be delivered by January 2022 to an Prospect started working in February. It is 250 metres Oceanian customer, the company said. long, 44 metres wide and has a deadweight tonnage of With this deal, Samsung Heavy has achieved 54% 113,232. of its annual order target of $7.8bn. The company has bagged orders for 29 vessels, which include 11 LNG and 14 crude carriers, it said.

FINNISH PAPER MARKET ORDERS 7 LNG VESSELS SINANJU, EXXONMOBIL SIGN

Finnish pulp and paper maker UPM has struck a deal CHARTER FOR LNG-FUELLED to charter seven LNG-fuelled vessels to transport its products to market. BUNKER TANKER The company said on August 26 it had signed the agreement with the Netherlands’ Spliethoff Group. Sinanju Logistics Services, the tanker operating arm of Spliethoff’s Bore subsidiary will supply three roll-on Sinanju Tankers Holdings, entered into a two-year time lift-off vessels for carrying UPM’s paper products, charter agreement July 25 with ExxonMobil Asia Pacific while its Wijnne Barends unit will provide four lift-on, for an LNG-powered new-build bunker tanker, Sinanju lift-off vessels for transporting its pulp and other said August 16 in a statement. forest products. The vessel will deliver ExxonMobil’s new engineered The vessels will be built in China, with delivery marine fuels to ocean-going vessels within Singapore scheduled for 2021-2022. port limits from Q1 2020. The vessel will join Sinanju’s “This arrangement is a consistent step in UPM’s 13-vessel bunker fleet in December 2019. logistics strategy. It will safeguard a sustainable, Under the Maritime Singapore Green Port competitive and reliable shipping solution for our Programme, registered vessels that are serviced by businesses and customers on long term,” Lauri Rikala, alternative or cleaner marine fuelled harbour crafts director of global break bulk shipping at UPM logistics, during their port stay – such as receiving bunker from said in a statement. LNG-powered bunker tankers – stand to receive a 10% Bore has already ordered its three vessels at the port dues concession. Wuhu shipyard in China, the Finland-based subsidiary “As responsible stakeholders of the maritime confirmed in its own release. The vessels measure industry, we are stepping up to promote the use of

LNG CONDENSED | NATURALGASWORLD.COM 49 NEWS: LNG IN TRANSPORT

LNG as a sustainable alternative marine fuel to reduce greenhouse gas emissions and we encourage more of K-LINE GETS DESIGN such bunker tankers to operate in Singapore,” Sinanju’s managing director Ju Kai Meng said. APPROVAL FOR LNG-FUELLED Marine Vicky is a 103-metre long 19-m wide bunker tanker classed by Bureau Veritas and has a carrying ORE CARRIER capacity of 7,990 dwt. It is equipped with a 55 m3 LNG tank paired with a fuel gas supply system on deck for Japan’s Kawasaki Kisen Kaisha (K Line) and Namura engine propulsion, Sinanju said. The vessel is built at Shipbuilding have secured a joint approval in principle for Keppel Offshore & Marine’s shipyard in Nantong, China, the concept design of an LNG-fuelled ore carrier from under the Maritime and Port Authority of Singapore’s Norwegian classification society DNV GL, K Line said LNG bunkering pilot programme. August 5. “ExxonMobil is glad to be partnering with Sinanju in K Line said work on this joint project was its effort to reduce emissions in its operations. We are complied with both environmental and actual committed to doing our part to meet the demand for operation requirements, based on the second cleaner marine fuel supplies safely and reliably, while generation Wozmax of Namura Shipyard. at the same time, reduce environmental impact and Wozmax, an optimal size of vessel, is the registered provide sustainable solutions,” said Asia Pacific sales brand of Namura Shipyard. The new design will keep director of ExxonMobil Marine Fuels, Koh Sing Liang. almost the same dead-weight and normal service speed as Wozmax, K Line said. Also, the ship will retain enough endurance for round-trips between Singapore and Brazil in gas fuel mode, arranging the LNG tanks in center section of hull. INDIAN STATE MULLS LNG FOR K Line said that environmental concern with greenhouse gas emissions is growing and it will, based FISHING BOATS on its environmental vision 2050, encourage less environmental load from marine transport by operating The southern Indian state of Kerala is looking to ships that are highly energy efficient and which promote the use of LNG as fuel in the fishing sector contribute to conservation of the global environment. and has decided to initiate a pilot project to retrofit an existing marine diesel engine system to enable it operate on dual fuel (LNG and diesel). State think-tank Kerala Development and Innovation Strategic Council (K-DISC) August 12 issued an FLOGAS ADDS 2 BIOGAS expression of interest (EOI) for the pilot project to use LNG to fuel a fishing boat. FUELLED LNG TRUCKS TO FLEET According to the document published on the K-DISC website, the project needs a vendor to modify the LNG supplier Flogas Britain has added two Bio-LNG “existing marine diesel engine and install required LNG powered trucks to its fleet, in a move that will see fuel storage tank and other associated equipment and them cut carbon emissions by more than 80% relative pipelines.” The project also requires modification in the to diesel and significantly reduce costs, it said August boat hull to accommodate LNG tanks, pipelines, and 9. The new trucks are part of the company›s wider other associated equipment. Interested parties must ambition to build a lower carbon future in the UK – as submit their EOI proposal at the latest by September 7 it commits to supply customers with 100% renewable at Petronet LNG’s Kochi LNG import terminal. energy solutions by 2040. The selected vendor shall be required to complete The two new Volvo FM tractor units, which will be the entire work in all respects within 18 weeks from the fully operational in August, will be used for logistical date of issue of the letter of acceptance, K-DISC said. operations, transporting bulk LPG and LNG nationwide. In order to tackle air pollution in urban clusters, India is They will join Flogas’s delivery network, which also looking to increase the proportion of gas in its energy mix. includes a number of dual fuel and electric hybrid- The Indian government has set target of raising the share of powered vehicles, as part of long-term plans to grow its gas in the energy mix from 6% at present to 15% by 2030. fleet of alternatively-fuelled vehicles.

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“These trucks are just the fi rst of many, as we look to “When it came to delivering the cleanest emissions, make our 200-strong fl eet cleaner, greener and increasingly the lowest noise and most effi cient running costs, futureproof,” says Flogas’s newly appointed National Volvo trucks came out on top,” says Flogas’s Head of Account Manager for Alternative Transport Fuels, James Logistics, Tim Eaton. Goodson. “They will each be powered by renewable Bio- “This is the fi rst time we’ve worked with Volvo, LNG – a highly sustainable biofuel that’s produced during but they have strong experience in LNG-powered the anaerobic digestion process. This means they’ll be vehicles, and the results of the trials simply spoke for 50% quieter; they’ll release signifi cantly fewer pollutants themselves. We’re excited to get these trucks on the and fuel costs will be far lower. road, and growing our Bio-LNG-powered fl eet further.” “As a leading LNG supplier in the UK, at Flogas The 6x2 Volvo Artic trucks have a tank range of we understand the critical role this fuel will play approximately 400-450 miles and are capable of pulling as we face stringent government targets to tackle a maximum gross weight of 44 metric tons. Powered by carbon emissions and improve air quality. Whilst it’s Volvo’s G13C460 LNG engines, their power and speed still in its infancy in the transport industry, the strong are comparable to standard diesel trucks – developing environmental and cost-saving benefi ts compared to 460hp (at 1,700-1800rpm) with a torque fi gure of conventional fuels, means LNG is set to become the 2,300Nm (delivered from 1,100 to 1,300rpm). fuel of choice for heavy goods vehicles. “Hauliers have long faced the challenge of how GREEN GAS to reduce their carbon footprint effi ciently and cost- effectively. LNG is not just an immediate fi x – it’s a long Green gas is injected into the grid as biomethane, term, reliable solution that makes business sense, and from Anaerobic Digestion plants. Each unit of that’s exactly why we’re championing it with our own green gas injected into the grid displaces a unit of fl eet.” conventional gas. Flogas purchases verifi ed green gas certifi cates to TRUCK TRIALS secure the rights to suffi cient units of green gas injected into the grid. Through a process known as mass balance Flogas opted for the Bio-LNG Volvo trucks following the equivalent amount is drawn from the national grid in-depth trials with a number of different manufacturers, to fi ll the trucks. The green gas certifi cates track the where a number of vehicles were put through their ‘biomethane’ through the supply chain and provide

paces fulfi lling both bulk and cylinder operations. certainty from production to end use. PHOTO: FLICKR.COM/KEES TORN

LNG CONDENSED | NATURALGASWORLD.COM 51 NEWS: LNG SHIPPING

freight rates stabilising and supply tightening. “Tighter DAEWOO TO BUILD 6TH LNGC product markets generally result in higher shipping demand due to arbitrage and re-loads, so the company expects a FOR MARAN GAS positive effect on the market balance in 2021,” it said.

South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) has secured a sixth order for a liquefied natural gas carrier (LNGC) from Maran Gas Maritime, a division of Greek shipping group Angelicoussis. JAPAN’S MOL, CHINA’S COSCO The 174,000 m3 LNGC is to be built at the Geoje Okpo shipyard and dispatched to Maran Gas in the SIGN MOU fourth quarter of 2021, DMSE said in an August 22 statement. It will be equipped with DMSE’s advanced Japanese shipowner Mitsui OSK Lines (MOL) and partial re-liquefaction system (A-PRS). Cosco Shipping Energy Transportation (CSET), which Maran Gas is one of DMSE’s top customers, and was is a subsidiary of China Cosco Shipping Corporation, responsible for six of the seven LNGC orders DSME August 6 signed a memorandum of understanding to has received this year. The pair are in talks on additional jointly work on LNG and ethane carrier projects, MOL orders, the South Korean firm said. said August 7 DMSE’s current orderbook for 2019 includes 17 MOL said it has a strong partnership with CSET going vessels worth $3bn. Besides the seven LNGCs, the back more than a decade. The two companies jointly company has also been commissioned to build crude oil participate in various ongoing projects, namely the carriers and submarines. ExxonMobil DES project, Australia Pacific LNG project and Yamal LNG project. The Japanese firm said it is now looking to deepen the partnership through the joint participation for the new opportunities of upcoming LNG and ethane FLEX LNG LOSSES WIDEN carrier projects. “Based on the solidified relationship through this MoU Oslo-listed LNG carrier owner Flex LNG reported a and accumulated history of cooperation over the decade, bigger loss in the second quarter after being stung by MOL and CSET, as mutual strategic partner to each other, lower gas prices. continue to lead and contribute to the development of the The company, set up by billionaire John Fredriksen and LNG and ethane transportation industry,” it said. Belgian shipping group Exmar in 2015, suffered a net loss of $3.9mn in the three months ending June 30, compared with $2.9mn in the same period last year, it said on August 20. Commenting on the results, Flex CEO Oystein Kalleklev said the first half had been “a cold shower” for JAPAN’S MOL PLANS TO the LNG industry, with only end consumers benefiting from the slump in gas prices. “Excess gas supply has EXPAND FSRU FLEET: PRESS predominantly been absorbed by European consumers, cutting sailing distances and thus affecting shipping Japanese shipowner Mitsui OSK Line (MOL) will more demand and rates,” he said. than double its fleet of LNG regasification ships to cater to The company’s time charter equivalent rate for the rising demand in southeast Asia, Nikkei reported August 6. second quarter averaged $46,266/day, up from $42,644 The company will add six floating storage in the previous three months. Vessel operating revenues regasification units (FSRUs), bringing its total to 10 by dipped to $19mn, down from $7mn a year earlier, 2025. This is part of plans to expand its LNG-related although adjusted pre-tax earnings (Ebitda) improved, fleet to 110 vessels by the same year from about 90 at rising to $11.3mn from $3mn. present, Nikkei reported. The company is expected to Flex LNG noted that the market showed signs of a invest upward of yen 100bn ($940mn) for these efforts, gradual recovery in the second quarter, with spot LNG including vessels for joint ownership.

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In August, Wood Mackenzie said in a report that GasLog booked a $26mn loss in its second-quarter demand for LNG from the south and southeast Asia results published August 1, compared with a $3.6mn region will grow over five times to reach 236mn metric loss a year earlier, after being hit by a drop in shipping tons/year by 2040 with almost half of that demand rates. Its revenues were down 13.9% at $132.8mn. The coming from Indonesia and India alone. company’s New York-listed subsidiary Gaslog Nikkei said that part of the addition to MOL’s fleet will Partners fared better in the period, achieving a profit of be a floating unit the company is building for a gas-fired $19.1mn, down from $29.6mn in 2018’s second quarter. power station to come online in Indonesia›s West Java province in 2021.

TEEKAY PROFITS UP ON HIGHER AWILCO REFINACES LNG LNGC CHARTERS

CARRIERS Bermuda-registered LNG carrier operator Teekay LNG Partners has reported $16.4mn net income for the Norwegian LNG transporter Awilco LNG has signed a second quarter, up from $2.7mn in the corresponding term sheet for the refinancing of its 156,000-m³ tri-fuel 2018 period. However, income was down on the diesel propulsion (TFDP) WilForce and WilPride LNG $21.6mn Teekay recorded in this year’s first quarter, the carriers, built in 2013, it said on August 2. company said in an August 1 report. The term sheet was agreed with an Asia-based leasing Results yr/yr were buoyed by revenues generated company, Awilco said, without revealing their identity. The by nine new LNG carriers added to Teekay’s fleet since refinancing is taking the form of a sale/leaseback, it said, May 2018 as well as expanded earnings from the Torben similar to the vessels’ current financing model. Spirit LNG tanker, following its redeployment under an The deal also allows for a full take out of the sale/ increased charter rate. leaseback facilities maturing at the end of this year at Teekay also benefited from lower vessel operating favourable terms, according to Awilco. The facility should be costs, reduced general and administrative expenses finalised in the fourth quarter, pending final credit approval. and higher revenues at its seven multi-gas tankers. But weaker earnings from the company’s conventional tanker fleet, owing to the sale of three ships in late 2018 and early 2019, was a drag on performance. Overall adjusted Ebitda came to $162mn in the three- GASLOG TAKES NEW LNGC month period, up from $158.2mn in the first quarter and $115mn in the second quarter of 2018. Meanwhile, FROM SOUTH KOREA distributable cash flow came to $56.3mn in April through June, compared with $54.2mn in the previous Monaco-based shipowner GasLog has taken receipt quarter and $31.1mn in the year-earlier quarter. of the 180,000-m3 GasLog Warsaw LNG tanker – the “Our financial results improved again this quarter first of eight such vessels ordered from South Korea’s compared with both the previous quarter and the same Samsung Heavy Industries (SHI). quarter last year due to recent newbuilding deliveries “This is the first vessel with 0.07% boil off rate and and higher charter rates on certain LNG carriers,” Mark reliquefaction providing the customer with lowest unit Kremin, CEO of Tekkay Gas Group, said in a statement. freight cost and maximum flexibility,” GasLog said in a He noted that these factors were “partially offset by brief social media message on August 1. an increase in drydocks and waiting times prior to the GasLog Warsaw will be dispatched immediately to commencement of recently secured LNG charters at serve US-based Cheniere Energy under a charter running higher rates.” until May 2021. After that Spanish power utility Endesa Teekay expects to see further gains during the will take control of the vessel under an eight-year charter second half now that new charters have started, that includes two optional six-year extensions. increasing its utilisation and revenues. Fewer drydocks, SHI has been commissioned to produce a total of the delivery of another three 50%-owned Yamal Arc-7 eight vessels for GasLog, with the remaining seven winterised carriers and the launch of the Bahrain LNG scheduled for delivery in 2020 and 2021. terminal should also lift performance.